Rémy Cointreau: Top Spirits Franchise, Back to July 2020 Levels

Company Update (RCO FP) (Buy)

Highlights

• RCO shares have fallen 17% since our last update in May

• Sales fell 35% in Q1 FY24, but largely due to CY22 inventory moves

• Growth should improve progressively in the coming quarters

• FY24 outlook implies an organically flat EBIT and a 24.5x P/E

• With shares at €129.85, we see a 55% return (19.1% p.a.). Buy

Introduction

We review our Rémy Cointreau investment case after shares have closed below €130 for the first time since July 2020, having fallen 39% since 2021 year-end, including a further 17% since our last update in May:

RCO Share Price (Last 5 Years)

Source: Google Finance (15-Sep-23).

Since May, RCO has published full FY23 results as well as a Q1 FY24 sales update.

RCO earnings are expected to fall cyclically in FY24, with particular weakness in H1. Year-on-year comparisons are distorted by prior-year inventory movements related to COVID disruption, and there may also be some genuine deceleration in U.S. consumption. Organic Net Sales growth was a negative 35% in Q1 FY24, but this…