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Allied Blenders & Distillers Ltd is poised for a rebound in the March quarter (Q4FY26) as earlier disruptions in key markets ease.

In Q3FY26, retail licence rebidding in Telangana, a crucial market, led to destocking and weaker sales. Simultaneously, policy changes in Maharashtra affected pricing and demand. As a result, the mass segment (popular brands), which drives a significant share of volumes, fell 10%, and overall revenue grew a modest 3% year-on-year in the quarter.

The situation in Telangana, however, has begun to normalize in Q4, management told Nuvama Research. While Maharashtra remains subdued, stronger growth in other states, potentially aided by reforms in Karnataka, should offset some of the impact. Uttar Pradesh continues to perform well, with ICONiQ White gaining momentum.

Overall, the company expects Q4 to outperform Q3 materially, with double-digit growth as volumes recover. The rebound could provide relief to the stock, down roughly 34% so far in calendar year 2026 amid broader weakness in Indian equities.

Profitability remains a bright spot. In Q3FY26, Ebitda grew 16% year-on-year, and margins expanded from 12% to 14%, driven by a favourable product mix and premiumization. The company sees long-term growth anchored in premiumization, cost efficiencies, exports, and brand scaling.

Even in a weak quarter, the premium segment (Prestige and Above) recorded 15% revenue growth and 17% volume growth, accounting for 47% of the 9MFY26 revenue. The target is to surpass a 50% share by FY28.

Premium products, with their higher margins, support overall profitability. ABD is building its premium and luxury portfolio under ABD Maestro; though currently small, it is expanding rapidly, with management aiming to double its revenue run rate in the near term. Investments of ₹700 crore in backward integration are expected to reduce costs and improve margins.

Management anticipates Ebitda margins rising from around 13.5% in Q3FY26 to 17-18% by FY28. Allied Blenders also has a presence in 31 countries, with exports contributing about 8% of revenue, expected to increase to 10-12%.

Despite the steep stock correction, Allied Blenders trades at an FY28 price-to-earnings multiple of 24x, according to Bloomberg data. While this is a discount to peers, downside risks, including downtrading from tax hikes or shifting consumer preferences and raw material inflation, limit the appeal of the valuation.

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