Rémy Cointreau: New Multi-Year Low with Weak Near-Term Outlook

Company Update (RCO FP) (Buy)

Highlights

• RCO shares are at a new low and have halved since 2021

• P/E is 18.7x relative to FY23 and 32.6x even with FY19

• Good risk/reward if Cognac growth recovers in due course

• We assume a 6.3% FY19-26 EPS CAGR and a 30x P/E

• With shares at €107.40, we see a 42% return (14.6% p.a.). Buy

Introduction

Rémy Cointreau (“RCO”) released H1 FY24 (April-September 2023) results on Thursday (November 30), having already provided a sales update on October 27. Shares fell 5.4% during the week and are near the 52-week low that was reached on the day of the sales update, having halved since the peak at the end of 2021:

RCO Share Price (Last 5 Years)

Source: Google Finance (02-Dec-23).

The downturn in RCO sales is turning out to be much worse than expected, with management now expecting sales to decline organically by 15-20% in FY24, and potentially to see only a limited recovery in FY25. Actual H1 FY24 results showed sales falling 22% organically and Current EBIT falling 47% as reported. Sales halved in the …