Radico Khaitan, Allied Blenders, Sula: Emkay sees up to 45% upside, shares Q3 preview

Emkay Global has come out with its Q3 results preview note on the alcoholic beverages sector, highlighting varying prospects for key listed players. The brokerage, which has up to 45 per cent upside targets for the stock, said Radico Khaitan Ltd is expected to see high-teens topline growth and 50 per cent earnings growth, while United Spirits Ltd is likely to post muted results with mid-single-digit topline and high single-digit Ebitda growth.

Allied Blenders & Distillers Ltd is projected to have a lacklustre quarter, with mid-single-digit topline and low single-digit earnings growth. Low-alcohol beverage players are likely to underperform, with flat earnings for Sula Vineyards Ltd and a 22 per cent earnings decline for United Breweries. Emkay has shifted its target price horizon from September 2026 to December 2026, retaining recommendations but cutting target prices for United Breweries and Sula by 6-13 per cent due to a weaker outlook. Allied Blenders and Radico remained its preferred picks.

Emkay Global has maintained 'Buy' on Allied Blenders and Radico Khaitan, 'Add ' on Sula (with a lower target of Rs 240), and 'Reduce' on United Spirits (target of Rs 1,400) and United Breweries (target cut to Rs 1,600).

Emkay Global believes domestic players are better positioned for revenue growth compared to international and low-alcohol peers. The analysts see the domestic franchise as more resilient in the current environment.

Radico Khaitan is expected to sustain outperformance, driven by market-share gains in Andhra Pradesh (AP) and strong volumes in popular segments. United Spirits is likely to see mid-single-digit growth, with low single-digit volume increases.

The AP volume recovery is already reflected in United Spirits base, while Maharashtra continues to be impacted by consumer downtrading. Allied Blenders is forecast to report mid-single-digit growth, with volumes affected by route-to-market changes in Telangana. In low-alcohol beverages, United Breweries may see low single-digit revenue growth, and Sula Vineyards is expected to have flat sales.

The ongoing Maharashtra Made Liquor (MML) policy continues to influence the performance of IMFL (Indian Made Foreign Liquor) players. New launches under the policy are gradually gaining consumer acceptance, though some downward trends have been observed. Retailers are seeing better margins with MML compared to IMFL. With the matter in the Bombay High Court, all industry participants can have their own MML launches for now. However, the final verdict could restrict participation by companies with foreign investments if it favours the state government.

Easing grain prices, now at Rs22-23, are helping widen the gap between 'make and buy' for Extra Neutral Alcohol (ENA) to Rs10-11/litre. Lower rice and maize prices are improving margins for captive users. Radico Khaitan and Allied Blenders, with captive ENA capacities, are expected to benefit from these margin improvements.

Emkay maintains its preference for domestic spirits players, citing their R&D edge, ability to address consumer needs swiftly, and margin advantages from captive production.