Nomura has initiated coverage on Allied Blenders & Distillers with an Rs 850 price target, projecting a 26% EPS growth through FY29. The brokerage highlights the company’s shift toward premium products and Rs 16 billion in capital spending. Investors should track whether the company can successfully execute its expansion plans and gain market share from established peers.
Brokerage firm Nomura has initiated coverage on Allied Blenders & Distillers, setting an Rs 850 price target for the stock. This update comes as the company attempts a strategic shift in its business model. Nomura analysts expect the company to achieve a 26% compound annual growth rate in earnings per share through FY29, driven primarily by a transition toward the 'Prestige & Above' spirits segment and improved operational efficiency.
Moving Toward Premium Spirits
Historically known for its mass-market Officer’s Choice franchise, Allied Blenders & Distillers is now aggressively targeting the higher-margin premium category. According to brokerage analysis, the 'Prestige & Above' segment now accounts for 47% of the company's total volume, up from 37% just two years ago. A significant part of this growth is linked to its ICONiQ White whisky brand, which reached a milestone of 10.7 million cases in FY26. The company is further expanding its portfolio with the ABD Maestro series, which includes gin, vodka, and rum, aiming to capture a larger share of the premium consumer market.
Capital Spending and Supply Chain Control
To support this growth, the company has committed over Rs 16 billion in capital spending. These funds are primarily allocated toward backward integration, which involves controlling the production of essential raw materials like malt, extra-neutral alcohol, and PET packaging. By reducing reliance on external suppliers, management aims to shield the business from market volatility and improve profitability. Nomura projects that these efforts could lead to an EBITDA margin expansion of 370 basis points in the coming years.
Competitive Context and Sector Dynamics
The Indian spirits industry is highly competitive, dominated by large incumbents such as United Spirits and Radico Khaitan. These established players have historically held a strong foothold in the premium segment. For Allied Blenders & Distillers, the challenge lies in successfully competing with these brands as it pivots its product mix. While premiumization is a sector-wide trend driven by changing consumer preferences, growth remains tied to a company's ability to maintain brand loyalty and distribution strength.
Key Monitorables and Risks
Investors should keep in mind that these growth projections rely on successful execution. The spirits industry faces several inherent risks, including regulatory volatility, as alcohol policy is determined at the state level in India. Additionally, any slowdown in consumer spending on premium spirits or delays in the planned capital expenditure projects could impact the projected margin improvements. The company's future performance will depend on its ability to scale its new premium portfolio globally while maintaining its existing market position. Investors may monitor updates on the ABD Maestro series performance and the progress of the company's ongoing capital spending projects to assess its transition effectiveness.