Recent Price Movement and Market Performance
Radico Khaitan’s stock has underperformed in the short term, declining by 4.48% over the past week compared to a modest 0.20% gain in the Sensex. Over the last month, the stock fell 6.09%, while the benchmark index dipped only 0.46%. This recent weakness contrasts with the company’s strong year-to-date (YTD) return of 18.42%, which comfortably outpaces the Sensex’s 8.22% gain. Over the last year, Radico Khaitan has delivered a remarkable 25.61% return, significantly outperforming the Sensex’s 4.80% rise. The stock’s long-term performance remains impressive, with a three-year return of 192.74% and a five-year surge of 573.43%, dwarfing the benchmark’s respective gains.
Despite this strong historical performance, the stock has been losing ground for two consecutive days, with a cumulative decline of 4.34%. On 17-Dec, it touched an intraday low of ₹3,060.85, down 3.42%, and the weighted average price indicates that more volume was traded near this lower price point, signalling selling pressure.
Adding to the bearish sentiment, the stock’s moving averages reveal a mixed technical picture. While the price remains above the 100-day and 200-day moving averages, it is trading below the 5-day, 20-day, and 50-day averages, suggesting short-term weakness amid longer-term support levels.
Investor participation has also waned, with delivery volumes on 16-Dec falling by 45.62% compared to the five-day average. This decline in investor engagement may be contributing to the stock’s recent softness, as lower participation often exacerbates price volatility.
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Fundamental Strengths Supporting the Stock
Despite the recent price decline, Radico Khaitan’s fundamentals remain robust. The company boasts a strong ability to service its debt, reflected in a low Debt to EBITDA ratio of 1.04 times. This prudent financial management reduces risk and supports sustainable growth.
Long-term growth metrics are encouraging, with net sales expanding at an annual rate of 19.76% and operating profit growing at 16.83%. The latest six-month period saw net sales reach ₹2,999.97 crores, a substantial 33.16% increase, while operating profit to interest ratio hit a high of 14.60 times, underscoring operational efficiency and strong interest coverage.
Radico Khaitan has reported positive results for five consecutive quarters, with quarterly PBDIT reaching a peak of ₹237.63 crores. Institutional investors hold a significant 43.47% stake in the company, indicating confidence from well-resourced market participants who typically conduct thorough fundamental analysis.
The stock’s consistent outperformance over the last three years, including beating the BSE500 index annually, further highlights its strong market position and investor appeal.
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Valuation and Risks Tempering Investor Sentiment
However, the stock’s valuation remains a concern for some investors. With a return on capital employed (ROCE) of 19.3%, Radico Khaitan is considered very expensive, trading at an enterprise value to capital employed ratio of 11.8. Although this valuation is at a discount relative to its peers’ historical averages, it still reflects a premium that may be limiting near-term upside.
Moreover, while the company’s profits have surged by 62.4% over the past year, the price-to-earnings growth (PEG) ratio stands at 1.4, suggesting that the stock’s price growth is somewhat ahead of its earnings expansion. This dynamic may be prompting cautious profit-taking among investors, contributing to the recent price decline.
In summary, Radico Khaitan’s share price dip on 17-Dec appears to be driven by short-term selling pressure, reduced investor participation, and valuation concerns, despite the company’s strong financial health and impressive long-term growth trajectory. Investors may view the current weakness as a temporary correction within a fundamentally sound stock.
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