Buy Allied Blenders and Distillers; target of Rs 600: ICICI Securities

ICICI Securitie's research report on Allied Blenders and Distillers

Guidance for FY28: 1) mid-teens revenue growth with early double-digit volume growth; 2) an increase in the saliency of the P&A segment to 50% (vs. 40% now); 3) gross margin and EBITDA margin of 45%+ and 17%, respectively; and 4) an improvement in ROCE to 23–25% (vs. 17% in FY25). Premium & Above segment (30 mn cases segment) contributes 10% of industry volumes but accounts for 42% of net contribution (profit). Within this, the super-premium & luxury segment (12 mn cases) contributes just 3% of overall industry volume but delivers 21% of profits. Realisations in premium and super-premium to luxury are 3x and 7x higher, respectively, than those in the prestige and semi-prestige segments.

Outlook

We model revenue/ EBITDA/ PAT CAGRs of 12%/18%/28%, over FY25-27E. Maintain BUY with a DCF-based revised target price of INR 600 (prior: INR 580). Key risks: Significant downtrading due to tax hikes, a potential ban on spirits in states, higher than-expected inflation in key raw material prices, and changes in consumer preferences.

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