Radico Khaitan Ltd. Upgraded to Buy on Strong Financials and Improved Technicals

Quality Assessment: Strong Fundamentals and Consistent Performance

Radico Khaitan’s quality metrics have remained robust, underpinning the upgrade decision. The company reported a very positive financial performance in Q3 FY25-26, with net sales growing at an impressive annual rate of 20.44%. Operating profit increased by 12.42%, and the company has delivered positive results for six consecutive quarters, demonstrating consistent operational strength.

Return on Capital Employed (ROCE) for the half-year period stands at a healthy 19.28%, indicating efficient utilisation of capital. The operating profit to interest ratio is exceptionally strong at 16.27 times, reflecting the company’s solid ability to service debt. Furthermore, the quarterly PAT of ₹162.10 crores grew by 40.1% compared to the previous four-quarter average, highlighting accelerating profitability.

Institutional investors hold a significant 43.85% stake in Radico Khaitan, signalling confidence from well-informed market participants with superior analytical capabilities. This institutional backing often serves as a stabilising factor and a vote of confidence in the company’s fundamentals.

Valuation: Expensive Yet Justified by Growth Prospects

Despite the upgrade, Radico Khaitan’s valuation remains on the expensive side. The company’s Enterprise Value to Capital Employed ratio is 10.8, which is considered very high. This elevated valuation reflects market expectations of sustained growth and profitability. However, the stock currently trades at a discount relative to its peers’ historical averages, suggesting some room for appreciation.

The Price/Earnings to Growth (PEG) ratio stands at 1, indicating that the stock’s price is fairly aligned with its earnings growth rate. Over the past year, profits have surged by 73.4%, outpacing the 26.08% stock return, which suggests that the market may still be underestimating the company’s earnings momentum.

Financial Trend: Strong Growth and Debt Management

Radico Khaitan’s financial trend remains positive, with a demonstrated ability to grow revenues and profits steadily. The company’s low Debt to EBITDA ratio of 1.04 times underscores prudent leverage management, reducing financial risk and enhancing creditworthiness.

Long-term returns have been exceptional, with a 3-year return of 153.76% and a remarkable 10-year return of 2,549.09%, vastly outperforming the Sensex’s 38.25% and 249.97% respectively over the same periods. Even in the last one year, the stock delivered a 26.08% return compared to the Sensex’s 7.97%, reinforcing its status as a strong performer within the BSE500 universe.

Technical Analysis: Shift to Mildly Bullish Momentum

The technical grade for Radico Khaitan has improved notably, shifting from a sideways trend to a mildly bullish stance. This upgrade in technicals was a key driver behind the overall rating change. On a daily basis, moving averages indicate a mildly bullish trend, supporting positive near-term price momentum.

However, the weekly and monthly MACD remain mildly bearish, suggesting some caution in the medium term. The Relative Strength Index (RSI) shows no clear signal on the weekly chart but is bullish on the monthly timeframe, indicating strengthening momentum over a longer horizon.

Bollinger Bands present a mixed picture: mildly bearish on the weekly chart but bullish monthly, reflecting some volatility but an overall upward bias. The KST indicator remains mildly bearish on both weekly and monthly charts, while Dow Theory and On-Balance Volume (OBV) show no definitive trend, highlighting the need for continued monitoring.

Price action today supports the technical upgrade, with the stock closing at ₹2,830.55, up 3.77% from the previous close of ₹2,727.70. The intraday high was ₹2,836.05, and the low ₹2,723.00, with the stock trading comfortably above its 52-week low of ₹1,846.10, though still below its 52-week high of ₹3,695.00.

Comparative Returns: Outperformance Against Benchmarks

Radico Khaitan’s returns relative to the Sensex reveal a strong outperformance over multiple time horizons. While the stock slightly lagged the Sensex over the past week (2.74% vs 2.94%) and underperformed over the last month (-4.05% vs 0.59%), its year-to-date return of -14.13% contrasts with the Sensex’s -1.36%, reflecting some short-term volatility.

Nevertheless, the stock’s one-year return of 26.08% far exceeds the Sensex’s 7.97%, and its three-year and five-year returns of 153.76% and 447.81% respectively dwarf the Sensex’s 38.25% and 63.78%. This long-term outperformance underpins the confidence in Radico Khaitan’s growth story and justifies the upgrade.

Risks and Considerations: Valuation and Market Volatility

While the upgrade to Buy is well supported, investors should remain mindful of certain risks. The company’s high valuation metrics, particularly the Enterprise Value to Capital Employed ratio of 10.8, suggest that the stock is priced for continued strong growth. Any slowdown in earnings momentum or adverse market conditions could pressure the stock price.

Additionally, the mixed technical signals, with some indicators still mildly bearish, imply that short-term volatility may persist. The year-to-date negative return of -14.13% compared to the Sensex’s -1.36% also highlights recent market headwinds that could affect sentiment.

Nonetheless, Radico Khaitan’s strong fundamentals, consistent earnings growth, and institutional backing provide a solid foundation for investors with a medium to long-term horizon.

Conclusion: Upgrade Reflects Balanced Optimism

The upgrade of Radico Khaitan Ltd. from Hold to Buy by MarketsMOJO on 9 February 2026 is a reflection of improved technical trends, strong financial performance, and a favourable quality assessment despite a relatively expensive valuation. The company’s ability to generate consistent returns, manage debt prudently, and deliver robust profit growth supports this positive outlook.

Investors should weigh the company’s growth potential against valuation risks and market volatility, but the overall assessment suggests that Radico Khaitan is well positioned to continue outperforming its sector and benchmark indices in the coming years.

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