Corticeira Amorim: Just a ST slowdown for cork leader
In this report we reiterate our Buy rating on Corticeira Amorim (COR) despite cutting our FV by 4% to Eur12.3 (from Eur12.8) as the rollover of our FV is more than offset by the weaker operational momentum driven by higher raw material prices and the negative impact coming from the flooring and wall covering division. Our EBITDA for 2018E falls by 8% to Eur135m and our 2019E and 2020E by c. 13%. Although COR is facing weaker momentum, it continues to be a clear leader in the cork stoppers activity and this slowdown in profitability should not last long. We believe it’s mostly driven by the increase in raw materials, with prices of the 2018 summer harvest up by 17% YoY, but also the secondary market of cork sub products (used to produce technical stoppers) having seen its prices almost double vs. last year. As the harvest volumes should improve in 2019E, profitability should recover for 2020E.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.
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