Jefferies has initiated coverage on Radico Khaitan and Allied Blenders and Distillers with a 'Buy' rating, while assigning a 'Hold' rating to United Spirits, saying the Indian alcoholic beverages sector is supported by a rising population of legal alcohol consumers, improving affordability and premiumisation.
The brokerage has set a target price of Rs 4,500 for Radico Khaitan, Rs 780 for Allied Blenders and Distillers, and Rs 1,560 for United Spirits. It has named Radico Khaitan as its top pick in the sector.
The brokerage said the India-UK free trade agreement could emerge as an important growth driver for the sector.
Jefferies said Radico Khaitan and Allied Blenders delivered strong execution and product innovation during FY22-FY26. Their P&A segment volumes grew 14-21 percent, compared with 2-6 percent for United Spirits and Pernod Ricard over the same period.
According to the brokerage, both Radico Khaitan and Allied Blenders have a long runway for premiumisation-led growth.
For Radico Khaitan, Jefferies said growth is being driven by product innovation in high-margin vodka, gin and Indian malt categories. It expects the company's earnings per share to grow at a compound annual rate of around 22 percent during FY26-FY29. While the stock trades at a 12-month forward price-to-earnings multiple of 62 times based on FY28 earnings estimates, the brokerage said the valuation is supported by the company's execution and brand-building capabilities.
On Allied Blenders, Jefferies said the company is transitioning towards a premiumisation-led growth story from a mass-market base. It expects earnings per share to grow at a compound annual rate of 30 percent during FY26-FY29, with gross margins expanding by around 300 basis points by FY28 as the premium portfolio gains share.
For United Spirits, the brokerage said the company remains a proxy for the premium and luxury alcoholic beverages segment, supported by parent Diageo's portfolio. It said the ongoing renovation of the McDowell's brand will be a key factor for future earnings upgrades.
Jefferies expects United Spirits' earnings per share to grow at a compound annual rate of around 12 percent during FY26-FY29. It said the stock's valuation of about 50 times FY28 estimated earnings limits the scope for further upside.
(With inputs from Informist)
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