Stock Spirits Group: Spirited strategy for competitive markets (stays HOLD)
Following its Analyst Day, held on 9 August, we maintain our HOLD rating on Stock Spirits Group (SSG) with a new price target (PT) of GBp 225/share (down from GBp 267). On the one hand, we continue to like the story due to: i) management’s ability to grow market share in the competitive Polish vodka market; ii) its premiumisation goal driving value growth; and iii) potential strategic M&A. On the other, however, pricing pressure in Poland, new product development (NPD) investments related to premiumisation, and salary cost pressures in CEE offer limited room for margin accretion (2020E EBITDA margin of 20.5%), in our view. The share price has de-rated by c.25% ytd and, on consensus 1YF P/E and EV/EBITDA, SSG is trading at 19%/13% discounts vs. its five-year averages. We see this as justified, however, due to the high uncertainty related to near-term competitive developments in Poland (i.e. Marie Brizard’s (MB) appointment of new manager and destocking action), and margin headwinds, driving our cautious stance and recommendation.Stock Spirits Group is a spirits company. Co. along with its subsidiaries are engaged in the production and distribution of branded spirits in Central and Eastern Europe. Co.'s spirits include vodka, flavoured vodka, rum, brandy and herbal bitter liqueurs. Co. has more than 40 brands and export internationally to more than 40 countries worldwide. Co.'s brands include Zoladkowa de Luxe, Lubelska, Zoladkowa Gorzka, Stock Prestige, 1906, Fernet Stock, Bozkov, Amundsen, Keglevich, Limonce, Stock Original, Keglevich, Golden, Stock 84, Fernet Stock Citrus, and Hammerhead. Co. has operations in Poland, Czech Republic, Italy, Slovakia, Croatia, and Bosnia and Herzegovina.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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