Investing in ultra-premium Scotch’s global growth
The Artisanal Spirits Company (ASC) FY2023 H1 trading update reported 1% sales growth with 7% growth in the second quarter and, importantly, a 9% increase in membership numbers to above 38,000. In addition, the statement reconfirmed the benefits of the company’s ultra-premium distilled spirits positioning, its focus on Scotch whisky, and the benefits of not only being international but also in control of its supply chain and distribution system.While the ASC’s H1 sales growth was beneath our full year expectation of 14%, the company was lapping a particularly strong growth in the same period a year earlier when sales advanced by 25%. The company itself remains confident that full year market expectations for sales and adjusted EBITDA will be met. We leave our own forecasts unchanged at £24.7m and £1.3m respectively for these two measures.
We draw a positive read-across from Diageo PLC's investor presentation in Edinburgh on 1st June (“Delivering sustainable long-term growth – our vibrant Scotch portfolio.”) Diageo’s central investment messages focused on premium Scotch as a growth category and its value creating qualities relative to other distilled spirits categories. In our view ASC is already a clear beneficiary from these trends and opportunities.
We base our 150p fair value/share, which implies a 4.8x FY2023 EV/sales ratio, on a relative valuation comparison with other international distilled spirits companies and luxury providers.
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