Crafting a comeback with barrel-proof execution
Allied Blenders & Distillers (ABD) is among the leading pan-India spirit players in India both in terms of volume (3rd largest) and value (4th largest). Its portfolio comprises of four key brands (c.95% of its volume), including the flagship brand Officer’s Choice whisky (OCW accounts for c.50-55% of its volume, among the top 5 whisky brands globally in volume terms), which enjoys leadership position/best-in-class profitability in the mass premium segment, and ICONiQ White whisky (c.28% of overall volumes in 1HFY26, fastest-growing whisky brand globally) in the Prestige & Above (P&A) segment. In the past, key concerns/challenges have been: a) relatively lower salience/success in the fast-growing P&A segment and slowdown in the mass premium segment and b) profitability and balance sheet metrics being weaker than peers.
Over the last 2 years, with further strengthening of the professional management team and availability of growth investment (post IPO), innovation intensity has been stepped up and interventions on extracting cost efficiencies have been made. Increased efforts are yielding promising results – a) Double-digit sales growth for the past 5 quarters led by ICONiQ White whisky (c.55% of P&A volume), b) Increased participation in the premium/luxury IMFL segment through launch of eight brands under the ABD Maestro portfolio, c) strong uptick in margins– 1HFY26 gross margin (GM)/EBITDA margin at 43.8%/12.4% (vs. 37%/7.3% in FY23), and d) increased capex investment (INR 5bn+ over FY25-27E) in backward integration.
Going ahead, recovery in growth in certain brands (OCW, Sterling Reserve), scale-up in ABD Maestro and moderation in working capital intensity will be key monitorables. Interventions are underway to revamp erstwhile brands and expand reach of the ABD Maestro portfolio. Repayment of dues from Telangana (INR 1bn received in October) has started and gradual moderation vs. FY25 peak levels should happen, in our view.
We initiate with a BUY rating and a Mar’27 TP of INR 730 (18.7% upside), valuing ABD at 47x Mar’27 EPS (discount to target multiple of UNSP/Radico). Upside risk – Price hikes in Telangana and faster scale up in ABD Maestro; downside risks include weak execution in P&A and adverse regulatory change in key markets.
