market folly

We're posting up notes from the Sohn San Francisco 2018 investment conference.  Next up is Shashin Shah of Think Investments who pitched a long of Radico Khaitan Ltd (RDCK-IN).


Shashin Shah's Sohn San Francisco Presentation: Long Radico Khaitan

Company

•    Long Radico Khaitan Ltd. (RDCK-IN), an Indian spirits company with domestic liquor brands

Thesis

•    Indian consumer staples have done really well over the last 15 years; +21% IRR
•    Per capita consumption of alcohol of 3L per person in India is much lower than the rest of the world and the world average of 6L per person
•    Radico has a 7% market share of the Indian branded liquor market
•    Really challenging to sell alcohol in India so barriers to entry favor existing players; in many states – distribution owned by the government
•    Magic Moments vodka has very strong 50% market share as the #1 in Vodka in India
•    Long runway for growth given vodka consumption (vs. other spirits) is underpenetrated versus other markets
•    Expect margin expansion to 20% in ~2+ years versus 17.5% this year (More upside given that industry peers Diageo and Pernod have margins of ~30%)
•    More recently have launched premium products that compete with products from Pernod and Diageo and have ability to drive further margin expansion
•    Have decreased leverage significantly – expect to be at 0.0x by 2019
•    Business is very attractively priced (Attractive valuation – 20x forward earnings, rev growth of ~20%; EBITDA growth of ~40%)
•    Management owns 40% of the business and has never sold a share


Be sure to check out the rest of the Sohn San Francisco 2018 presentations.