Why Is Nomura Bullish On Allied Blenders & Distillers Despite Industry Challenges?
Nomura has maintained its Buy recommendation on Allied Blenders & Distillers with a target price of ₹850. The brokerage believes the company is entering its next phase of growth driven by premiumisation, new product launches and improving profitability.
Allied Blenders & Distillers has emerged as one of the most closely watched players in India's alcoholic beverage industry. According to Nomura, multiple growth engines are now working simultaneously, positioning the company for stronger revenue and earnings growth over the next few years.
What Is Driving Nomura's Positive Outlook?
- New product launches in underpenetrated categories.
- Expansion in the Prestige & Above premium segment.
- Backward integration initiatives.
- Margin expansion through operational efficiencies.
- Benefits expected from the UK-India Free Trade Agreement.
Nomura believes the company is "firing on all cylinders" as several strategic initiatives are beginning to contribute simultaneously. This reduces dependence on any single brand or product category and creates multiple avenues for growth.
Premiumisation Remains A Major Opportunity
India's alcoholic beverage market has been witnessing a gradual shift toward premium products as consumer preferences evolve. Higher-income consumers increasingly prefer premium and prestige brands, resulting in better realizations and stronger profitability for manufacturers.
A larger contribution from Prestige & Above brands generally improves operating margins because premium products command higher pricing power and stronger profitability than mass-market offerings.
Nomura expects Allied Blenders to benefit significantly from this industry-wide trend over the coming years.
Backward Integration Could Boost Profitability
One of the most important elements of Nomura's investment thesis is the company's backward integration strategy. By increasing control over parts of its supply chain, Allied Blenders can potentially improve efficiency, reduce costs and enhance margins.
The brokerage expects this initiative to contribute meaningfully toward both revenue growth and earnings expansion between FY26 and FY29.
• Mid-teen sales growth during FY26-FY29
• Mid-twenties EPS growth during FY26-FY29
Strong Margin Expansion Expected
A major highlight of Nomura's outlook is the expectation of significant profitability improvement.
| Metric | Expectation |
|---|---|
| Revenue Growth | Mid-Teen CAGR |
| EPS Growth | Mid-Twenties CAGR |
| Margin Expansion | 370 Basis Points |
According to Nomura, margin expansion is expected to be driven by three major factors:
- Premiumisation of the product portfolio.
- Benefits from backward integration initiatives.
- Potential gains arising from the UK-India Free Trade Agreement.
What Should Investors Watch?
Investors tracking Allied Blenders should monitor:
- Performance of newly launched products.
- Growth in Prestige & Above segment volumes.
- Execution of backward integration projects.
- Operating margin trajectory.
- Impact of regulatory and taxation changes on the liquor industry.
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that Nomura's positive stance on Allied Blenders is based on a combination of premiumisation, improving operational efficiency and margin expansion. If management executes successfully on these growth initiatives, the company could witness stronger earnings growth over the next few years.
Written by Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
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