Radico Khaitan all set for a multi-year breakout? | Economic Times

Mumbai: Radico Khaitan is on the verge of a multi-year breakout and the stock is headed for a rally toward Rs 600 from the current price of Rs 487. Fundamentals also support the stock; valuations are at a steep discount to peers and offer attractive upside.After consolidating for nearly three years, the stock has witnessed a breakout on the higher side this week and analysts expect an upward movement of up to 25 per cent in the near-term.“The stock has seen consolidation between Rs 390 and Rs 480 levels for the last four months and moved above the range,” said Ashish Chaturmohta, head – technical and derivatives, Sanctum Wealth Management. “Once it crosses and sustains above Rs 500, a rally toward Rs 600 levels can be seen, with a support at Rs 470 and Rs 430 levels.”A multiple price pattern breakout on monthly scale indicates a start of fresh rally in the stock, said analysts.“The stock is holding well above its 50 DEMA (double exponential moving average) on daily scale along with price volume breakout on a lower time frame,” said Chandan Taparia, technical analyst, Motilal Oswal Financial Services. “A hold above Rs 499 could drive its move toward Rs 550 and Rs 575 zones while support exists at Rs 455 levels.”Radico Khaitan is the third largest Indian Made Foreign Liquor (IMFL) company in terms of sales and profits and has been outperforming the industry with a volume CAGR of 10 per cent, led by faster growth in premium brands at a 14 per cent CAGR since FY17. The stock has gained 15 per cent in the last three months and 33 per cent in the last three years.80160585According to Vikas Jain of Reliance Securities, the stock has witnessed a breakout on the higher side from its monthly doji candle over the past few days. “It is near to its multi-year highs of Rs 499 levels of 2018 and we expect to cross and scale further to Rs 550-570 levels,” he said.The management has made significant effort to improve profitability and cash flows by reducing working capital by 50 per cent and debt by Rs 640 crore in five years. The street expects sales and earnings of the company to recover and rise at a 13 per cent and 18 per cent CAGR, respectively, through FY23, with continued improvements in cash flows and return on equity.Radico’s focus on investing in new launches and premiumisation, and deleveraging the balance sheet has kept the growth momentum steady, said analysts.