Motilal Oswal Securities reccomended  'Buy' on Radico Khaitan at a target price of Rs 115 compared to market price of Rs 97 on August 13. 

Commenting on the investment rationale, Motilal Oswal  said, "Radico Khaitan’s 1QFY15 performance was  weak with volume, sales, EBITDA and PAT coming well below expectations. Lack of price increases from state governments, RM inflation coupled with strategy to defocus on regular portfolio marred the quarterly results.  

Sales grew muted 3.5% to Rs 3.7billion. Gross margins contracted 90bp YoY to 52.2% led by RM inflation. Increase in ad spends (up 80bp YoY to 20%), staff (up 100bp YoY to 6.5%) and other expenses (up 80bp YoY to 12.1%) further dragged EBITDA margin (down 350bp YoY) to 13.6% (est. 17.2%). Thus EBITDA posted decline of 17.9% YoY to Rs 501million.We have revised our estimates downwards by 20-25% to adjust for 1Q miss and guidance for gradual volume recovery".

While our belief in the Radico story remains intact, we do see near term weakness in the stock. It trades at 16.2x FY15 and 13.5x FY16 estimates. We maintain BUY with a revised TP of Rs 115."

Shares of the company declined Rs 0.55, or 0.58%, to trade at Rs 94.60. The total volume of shares traded was 12,786 at the BSE (11.21 a.m., Wednesday).

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