Corticeira Amorim: Looking attractive once again
We upgrade Corticeira Amorim from Neutral to BUY after the shares have suffered a correction of c. 16% (vs. +4% for PSI20) since July 2017 (we downgraded the shares to Neutral last summer). Our FV moves to Eur12.8 (+5%), as the negative effect of adjusting our numbers due to the forex situation and the high price of raw materials was offset by rolling over our FV to 2018. From a valuation perspective we once more see a reasonable valuation for a quality growth company that is a clear leader in its sector and with FCF poised to improve as it will reduce working capital in 2018-2020E. We believe that 2018-2019E may produce some margin pressure due to a short-term period of higher raw material prices due to less availability, but the company looks well protected in that event as inventories have grown from c. 42% of sales in 2016 to 51% in 2017, and its leadership position was strengthened with the acquisition of Bourrasse in 2017. We believe the long-term fundamentals of growth in the high end wine industry and the potential for new applications should remain triggers for a rerating.Corticeira Amorim, S.G.P.S. is a holding company. Through its subsidiaries, Co. is engaged in the production, sale and distribution of cork products, including natural and agglomerated cork stoppers for the wine industry; cork stoppers and other components for the sparkling wines, spirits and champagne industry; cork plank and other products resulting from the processing of cork and used in other segments of the cork industry; floor and wall coverings; composition and granulated corks with several technical and industrial applications; cork with rubber; and expanded pure agglomerated and regranulated corks for technical, acoustic and vibration insulation.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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