Remy Cointreau: Credit Suisse lowered its price target – 06/06/2022 at 10:33

(AOF) – Credit Suisse lowered its target price on Rémy Cointreau from €200 to €190, reiterating its Underperformance view. The broker, however, welcomed the strong trends in the US and Europe. China will penalize the first quarter, but the recovery will be quick thanks to “revenge spending”.

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key points

– Spirits group born in 1703, with 12 global brands -Remy Martin, Brillet and Louis XIII for cognacs, diversified in liqueurs and spirits with Cointreau and Metaxa for spirits, Mount Gay for rum, The Botanist for gin and, for whiskeys, Bruichladdich , Port Charlotte, Ocformore, Westlan and Hautes Glaces;

– Sales of €1.3 billion split between 3 divisions – cognac for 72%, liqueurs and spirits for 25% and partner brands for 3%;

– International positioning, with the United States being the group’s main market (55% of sales in the Americas), ahead of Europe-Middle East-Africa (17%) and Asia-Pacific (28%);

– Business model: become world number 1 in exceptional spirits and control the distribution circuit (85% of sales) in order to control the sale prices of exceptional spirits, with a unit price above $50;

– Capital controlled by the founding families (approximately 57% of the shares and more than 70% of the voting rights), with Eric Vallat managing director and Marcel Hérard-Dubreuil chairman of the 12-member board of directors;

– Solid balance sheet reinforced by the payment of the dividend in shares, with net debt rated A and leverage reduced to 0.77.

Challenges

– Ambition to become the world leader in spirits with, for the goals of 2030, a gross margin of 72% increasing its unit value and an operating margin of 33%;

– Innovation strategy focused on e-commerce growth, accelerated by partnerships, such as Alibaba (1/5 of digital sales in China);

– Environmental strategy “Sustainable Exception 2025”: aiming at carbon neutrality by 2050, 100% responsible purchases, 62% of surfaces with responsible agricultural practices, 82% renewable electricity;

– Strengthening of the whiskey division: launch of a product made in France, the 2nd largest consumer of the drink, and 2 Bruichladdich sales campaigns in China and the United Kingdom;

– After the integration of the cognac house JR Brillet and the champagne house J. de Talmont and the sale of shares in the Pesso joint venture, further increasing the portfolio;

– Support for market valuation by controlling strategic stocks, estimated at more than €50 per share, and facilitating customer acceptance of sales price increases.

Challenges

– High seasonality in sales, therefore, a year ended March 31;

– Lack of critical size in relation to competitors and strong dependence on Maison Rémy Martin (+ 80% of operating profit) for cognacs with better margins than liqueurs and spirits;

– 54% growth in sales and doubling of net income in the first half of the year ended March 31;

– Expectations 2021/22: despite the confinements in China and the strong investments in marketing and communication in the 2nd half, for a sharp increase in sales and operating margin.

An expanding fair trade in France

This trade has nearly tripled in five years, reaching 1.83 billion euros in 2020 in France. Based on a more profitable model for producers in southern countries, it was developed by the NGO Max Havelaar in 1988. The latter labels 90% of fair trade in the world with a total of 10.7 billion dollars in 2019 This trade is 95% of food products. Coffee, chocolate, bananas and sugar cane account for three quarters of sales. In our territory, the NGO will label wheat from the Gers and milk from Poitou-Charentes. The French market is developing through mass distribution, which accounted for 54% of sales in 2020 against 42% in 2018. However, while organics account for 6.5% of consumption in France, the share of fair trade is limited. at 1.5%.

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