Compelled to revisit some of my thesis here after the investor presentation said IMFL margins are higher.
Margins will further expand in the distillery segment as the share of IMFL goes up and hence for the overall co.
I did a scenario analysis of what the margins could be for IMFL and other distillery segments:-
Segment |
Revenue |
Scenario 1 |
Scenario 2 |
Scenario 3 |
Scenario 4 |
IMFL |
380 |
45% |
35% |
38% |
40% |
Other Distillery |
257 |
8% |
23% |
19% |
16% |
|
637 |
30.2% |
30.2% |
30.2% |
30.2% |
|
|
|
|
|
|
IMFL EBIT |
|
171 |
133 |
144 |
152 |
Other Distillery EBIT |
|
21 |
59 |
48 |
40 |
Total |
|
192 |
192 |
192 |
192 |
To my mind, somewhere between scenario 3 and 4 is where the story lies..
Future projections basis 25% growth assumption for IMFL only
Margins for each segment taken as average of scenario 3 and scenario 4
Stagnant revenues assumed for other distillery products
IMFL CAGR Growth (Assumption) |
25% |
|
|
Revenues |
FY26 |
FY27 |
FY28 |
IMFL |
475 |
594 |
742 |
Other Distillery |
257 |
257 |
257 |
Total Revenues |
732 |
851 |
999 |
EBIT |
FY26 |
FY27 |
FY28 |
IMFL |
185 |
232 |
289 |
Other Distillery |
44 |
44 |
44 |
Total EBIT |
229 |
276 |
334 |
|
|
|
|
EBIT Multiple |
33 |
33 |
33 |
Valuation |
7,571 |
9,099 |
11,010 |
Key assumption here is that other distillery segment remains stagnant when we all know that won’t happen.
Also, please note the numbers are super super conservative. The distribution for Piccadily has expanded drastically. Critical whisky and rum markets have only been penetrated in Q4FY25. See below
|
Q1FY25 |
Q2FY25 |
Q3FY25 |
Q4FY25 |
Notes |
Countries |
25 |
25 |
28 |
28 |
Spain & Malaysia - critical markets added in Q3 |
States |
20 |
21 |
23 |
28 |
Key southern markets added in Q4 i.e. Andhra, TN and Kerala |
India Duty Free |
8 |
11 |
15 |
16 |
|
International Duty Free |
6 |
7 |
9 |
11 |
|
Radico and USL, both trade at 60-65 times EBIT at present.
Did some sensitivity analysis too:-
Y axis - exit EBIT multiple for FY28
X axis - YoY Growth rates for IMFL segment
Scenario Analysis |
25% |
26% |
27% |
28% |
29% |
30% |
38 |
12,678 |
12,944 |
13,214 |
13,489 |
13,768 |
14,051 |
40 |
13,345 |
13,625 |
13,910 |
14,199 |
14,493 |
14,791 |
42 |
14,012 |
14,306 |
14,605 |
14,909 |
15,217 |
15,530 |
44 |
14,680 |
14,988 |
15,301 |
15,619 |
15,942 |
16,270 |
46 |
15,347 |
15,669 |
15,996 |
16,329 |
16,666 |
17,009 |
48 |
16,014 |
16,350 |
16,692 |
17,039 |
17,391 |
17,749 |
50 |
16,681 |
17,031 |
17,387 |
17,749 |
18,116 |
18,488 |
Parts in bold is the likely outcome come FY28. Key triggers - new products, rising supply (barrels, malts, etc.)
This is my thesis on this stock.. happy to listen to counters.
Btw the discounted EBIT multiple takes care of sugar business as part of the overall co. If demerger etc happens, multiple could rerate further.
EDIT - will look to add this again in coming weeks. It’s at a good entry point at present.
Also I’m surprised as to how so few people have appreciated the fact that Piccadily has the vision to gain expertise and just be part of the ecosystem in Scotland via its distillery there. This is far ahead of competition and they will reap fruits of it in next 5-10 years.
The co does have all the potential to be the flagbearer of Indian spirits industry.
Will revisit these assumptions in Q1FY26 since I expect it to be bumper given geographical expansion in critical south markets