UBL, Radico Khaitan, ABDL, United Spirits: What ICICI Securities said on these alcoholic stocks

Domestic brokerage firm ICICI Securities has provided a detailed analysis of major players in the alcoholic beverages sector, issuing specific ratings and target prices. United Breweries (UBBL) has been assigned an 'add' rating with a target price of Rs 2,300. This decision reflects expectations of a 13 per cent CAGR in revenue and an 8.5 per cent CAGR in volume growth from FY25 to FY27, driven by an expanding premium portfolio and a robust distribution network. The brokerage emphasises UBBL's market leadership, supported by new product launches and a recently announced greenfield expansion in Uttar Pradesh. They mention that a relaxation in state taxation and distribution policies could further accelerate volume growth, projecting a significant upside potential.
 

Radico Khaitan and Allied Blenders and Distillers are poised to benefit from the industry's premiumisation trend, each receiving a 'buy' rating from ICICI Securities. The firm expects accelerated growth in their premium portfolios driven by favourable demographics and rising disposable incomes. Radico Khaitan's superior brand quality and strong execution are expected to drive a revenue CAGR of 16 per cent over the same period, with a DCF-based target price of Rs 2,900. Allied Blenders and Distillers are similarly expected to see gains as they enhance their premium offerings.
 

United Spirits continues to receive an 'add' rating and a target price of Rs 1,700, with its performance buoyed by a high exposure to premium brands. ICICI Securities notes that while the premiumisation process is ongoing, the pace is moderated by external demand factors, particularly in the luxury segments. The firm's analysis indicates a steady outlook for United Spirits, supported by its strategic focus on premium products amidst a competitive market environment.
 

The analysis by ICICI Securities also highlights potential risks for the alcoholic beverage industry, such as regulatory changes, increased taxation, and consumer behaviour shifts. UBBL's profitability has previously been impacted by raw material price volatility and limited pricing flexibility due to state regulations. However, the company is expected to leverage operating efficiencies and a focus on premiumisation to improve its EBITDA margin by 300 basis points over FY25-27. Additionally, UBBL's strategy includes addressing supply chain constraints and exploring collaborative farming to stabilise raw material costs.

Overall, ICICI Securities projects the alcoholic beverage industry to register high single-digit volume growth, driven by demographic factors and increasing affordability. Despite the challenges, such as regulatory complexities and higher state-imposed taxes, the sector shows promise due to its potential for growth in premium segments. UBBL and its peers are expected to maintain their market positions through strategic expansions and product innovations, which are crucial for capitalising on the evolving market dynamics.