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ECO579-无代写
时间：2023-12-11
Equity Research Report
Victoire Buiatti
November 30th, 2020
ECO579 – Case Studies in Corporate Finance
Industry: Spirits
BUY
Share Price: €159.70
Price Target: €180.00
PERNOD RICARD
November 30th, 2020
Share Price Performance (€)
Key Financials
Stock Data
Encouraging Q1 despite Covid-19, strong resilience and agility for FY21
SUMMARY
▪ Q1 FY21 in decline but in marked improvement vs. Q4
FY20 thanks to partial on-trade reopening and continued
off-trade resilience
▪ Despite continued uncertainty and volatility expected
during FY21, Pernod is well positioned to navigate the
current environment given the resilience of off-trade in the
US and in Europe, the return to growth in China, and the
gradual improvement in India
▪ We believe sales will return to growth in Q2 FY21
▪ The future is promising with Pernod’s accelerated digital
transformation and strict cost discipline
INVESTMENTS DRIVERS
Pernod is well positioned to navigate the current environment:
▪ Off-trade expected to remain very resilient
▪ Markets to benefit from partial reopening despite the on-
trade channel being still disrupted due to the lockdown
measures
▪ Strong shipments throughout the work ahead of the festive
period
▪ Travel Retail expected to remain in severe decline ((64%)
for Q1 2021) despite some domestic travel resuming
▪ US (+6% sales organic growth for Q1 2021): robust market
with strong off-trade resilience and on-trade reopening
▪ China (+4% sales organic growth for Q1 2021): growth
driven by on-trade recovery and sale ahead of festive
season
▪ India ((13%) sales organic growth for Q1 2021): improving
vs. last quarter but still lagging due to COVID-19
▪ Europe ((5%) sales organic growth for Q1 2021): good
resilience despite the hard hit of the pandemics on Spain
and Russia; strong dynamism in the UK and Germany
VALUATION
▪ Blended valuation methods (discounted cash flows,
precedent transactions, trading comparable) yield a
Target Price of €180.00
Sources: Company Website, Investor Relations, Broker Reports
Share Price (€) 159.70
Date 27-Nov-20
Price Target (€) 180.00
52-Week Range (€) 112.25 - 171.10
Market Cap. (€bn) 41.82
Shares Out (m) 261.88
Free Float 75.00%
Ticker (Reuters) PERP.PA
We reinstate with a Buy rating, €180 PT, 13% upside
30-Jun YE 2019A 2020A 2021E
Net Sales (€m) 9,182 8,448 8,448
EBITDA (€m) 2,807 2,611 2,611
EBITDA Margin 30.6% 30.9% 30.9%
EBIT (€m) 2,581 2,261 2,261
EBIT Margin 28.1% 26.8% 26.8%
Net Income 1,455 329 1,439
Net Debt 6,620 8,424 7,310
Net Debt/EBITDA 2.4x 3.2x 2.8x
Spot 1m 3m 6m 1Y 5Y 10Y
Share Price (€) 159.7 144.8 147.0 141.0 167.0 107.8 64.0
Performance n.a. 10% 9% 13% (4%) 48% 150%
1
Company Overview
A UNIQUE PORTFOLIO OF PREMIUM BRANDS
▪ Founded in 1975 through the merger of two French anise-based spirit companies, Pernod Ricard
became the world's second-largest spirits company, with a strong presence in all regions
▪ Pernod's main markets are the US, China, India and an important exposure to Travel Retail
▪ Its main brands are Martell Cognac, Jameson Irish Whiskey, Absolut Vodka and Chivas Regal Scotch
▪ Pernod Ricard has built a unique portfolio of Premium brands on an international scale that is one of
the most comprehensive on the market. This portfolio is managed centrally thanks to the House of
Brands, a dynamic tools allowing affiliates to more efficiently prioritize marketing investments
KEY PEOPLE
OWNERSHIP STRUCTURE
▪ Pernod Ricard is listed on the Paris Stock Exchange.
▪ The Ricard family is the largest shareholder, through Société Paul Ricard (comprising Société Paul
Ricard, and a number of other entities), which holds shares representing 15.8% of the share capital
and 21.3% of the voting rights
▪ Groupe Bruxelles Lambert is another long-term holder, with a 7.6% shareholding
▪ The Board, Management and employees hold 2.5% of the capital
KEY HIGHLIGHTS
Alexandre Ricard
Chairman and CEO since 2015
▪ Joined Pernod Ricard in 2003
▪ Previous roles: MD of PR
Asia Duty Free, CEO of
Irish Distillers and COO
Hélène de Tissot
CFO since 2018
▪ Joined Pernod Ricard in 2002
▪ Previous roles: Group
Strategy and M&A Director
and CFO of the Asia region
18,776
Employees(1)
94
Production sites(1)
160+
Countries with distribution
€41.8bn
Market Capitalization
#1
for Premium/Prestige Spirits
€8,448m
FY20 Sales
€
#2
for Wine and Spirit
16 Brands
amongst the world’s Top 100
Sources: Company Website, Investor Relations, Broker Reports
Note: (1)as of 30-Jun-20
2
Industry Snapshot and Competitive Positioning
▪ Market fragmentation in the wine & spirit industries is increasing every year with innovation and new
brands creating more offer whilst new sales and communication channels are increasingly used by
customers
▪ To succeed, it is critical to address the right brand in the right place at the right price to the right
customers; firms must master new technology and data to digitize the route-to-consumer and provide
seamless and direct interactions
KEY SECULAR TRENDS
Spirits companies generate +30% of sales from premium products (pre Covid-19)
Spirits companies generate +25% of sales volumes on-trade(1) (pre Covid-19)
Spirits companies generate between 22% and 32% EBIT margin (pre Covid-19)
72%
52%
75%
60%
25%
45%
23%
29%
2%
Pernod Ricard Campari Diageo Remy Cointreau
Off-Trade On-Trade Travel Retail
63% 69% 64%
19%
37% 31% 36%
81%
Discount & Mainstream Premium & above
28%
22%
32%
24%
Pernod Ricard Campari Diageo Remy Cointreau
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) On-Trade sales correspond to B2B (e.g. bars, restaurants) while Off-Trade is B2C (e.g. customers buying in a supermarket
3
Industry Snapshot and Covid-19 Focus
COVID-19 IMPACT
▪ There was significant demand impact from COVID-19, due to both travel-retail and on-premise
channels’ weakness given travel restrictions, social distancing and bar/restaurant closures. We still
expect negative impact from the pandemic in the coming months;
▪ Spirits look more vulnerable in the current environment, where social distancing measures radically
reduce on-trade consumption, while a weaker macro and rising unemployment are likely to depress
consumers' disposable income and eventually lead to downtrading(1);
▪ The lockdown measures did not only impact Europe and the US abut also Emerging Markets; we are
particularly cautious about the demand and the pace of recovery in emerging markets – and it would
be misleading to extrapolate consumer behavior in markets like the UK and US to EM.
Spirits companies had lower leverage compared to 2009
EBIT margin remained resilient during the previous crisis
Recovery to pre Covid-19 level expected to take place in the next 2-3 years
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) downtrading occurs when customers switch from expensive brands to cheaper alternatives
5.4x
2.4x 2.4x
3.2x
2.4x
1.6x
2.9x
1.3x
Pernod Ricard Campari Diageo Remy Cointreau
2009 2019
23%
21%
29%
20%
24%
21%
28%
19%
26%
24%
28%
18%
25%
24%
29%
18%
Pernod Ricard Campari Diageo Remy Cointreau
2007 2008 2009 2010
2019 2024202220212020 2023
Covid-19
4
Investment Case
FASTER RECOVERY THAN THE INDUSTRY
▪ We think Pernod Ricard's premium portfolio (~40% of sales) means it could be vulnerable to downtrading in the
near term, as is the case for most companies in the Spirit industry;
▪ However, in relative terms, we think Pernod Ricard might recover more quickly than peers if consumption starts
improving in China (~10% of net sales);
▪ We do not expect Pernod Ricard to cut costs too significantly, as management focus remains on long-term growth,
but we see a higher margin opportunity in the longer term and a potential to eventually catch-up Diageo’s EBIT
Margin (32%);
▪ In the long term, we highlight that Pernod has some catching up to do to match Diageo's ROIC (7% vs. 12% in
FY19);
▪ The speed of recovery will depend on the pace of normalization in China, growth in Travel Retail, the
extent to which consumers trade-down globally and the impact of the cost-saving measures the company
initiated a few years ago;
▪ We expect a full recovery by 2022 to pre Covid-19 levels and return to growth in the following year.
ACQUISITION STRATEGY PAYING OFF, MORE TO COME
In the next few years, a large acquisition could be the next catalyst for the stock. This could drive synergies as well as
complete the portfolio gaps such as Tequila. If this transaction were to take place, Pernod Ricard could restructure
some of the route-to-market in key geographies such as the United Sates where it has been consistently
underperforming Diageo.
SUCCESFUL PURSUIT OF PORTFOLIO TRANSFORMATION
Pernod today has an enhanced portfolio as a result of a profound transformation over the past five years. Through
numerous bolt-on deals, Pernod has solidified its portfolio with very limited portfolio gaps compared to peers and
further enhanced its global footprint. Pernod enjoys a leading position in Cognac, Vodka and Irish Whiskey, with
identified weakness in the booming Tequila category.
Sources: Company Website, Investor Relations, Broker Reports
Mainstream Scotch
Premium Scotch
US Whiskey
Canadian Whiskey
Irish Whiskey
Indian Whiskey
Mainstream Vodka
Premium Vodka
Cognac
Rum
Gin
Tequila
Baijiu
Liqueurs and others
Wines
Champagnes
5
Financial Performance Analysis
Pernod Ricard’s financial statements are prepared in accordance with IFRS (International Financial
Reporting Standards) as adopted by the European Union. The Group’s financial year runs from July 1st to
June 30th.
The company applies the following accounting principles:
▪ Revenue recognized when control of the product is transferred to the customer;
▪ Inventory stated at the lower of their cost or their net realizable value;
▪ Depreciation of PP&E determined using the straight-line method based on estimated useful life;
▪ Intangible assets (brands) are subject to impairment tests at least once a year;
▪ Research and Development costs are expensed as incurred.
SALES ANALYSIS
Sales Evolution (in €m)
Breakdown and Evolution by Geography
Sources: Company Website, Investor Relations, Broker Reports
8,682
9,010 8,987 9,182
8,448
2016A 2017A 2018A 2019A 2020A
▪ Growing Sales from 2016A to 2019A with a
CAGR of 1.9%
▪ As a result of the Covid-19, revenue decreased
in 2020A (8.0%) vs. 2019A
Americas
28%
Asia
ROW
43%
Europe
29%
2019A
Americas
29%
Asia
ROW
41%
Europe
30%
2020A
Americas
29%
Asia
ROW
40%
Europe
31%
2016A
Americas Asia/ROW Europe
3,498 3,568
3,648
3,966
3,467
2016A 2017A 2018A 2019A 2020A
2,709 2,781 2,793 2,673
2,532
2016A 2017A 2018A 2019A 2020A
2,476
2,661
2,546 2,546
2,449
2016A 2017A 2018A 2019A 2020A
▪ Stable geographic mix
over time
▪ Growing share of
Asia
▪ FY20 results affected
by the early lockdown
measures in Asia in
2019/2020
Underperformance due to lackluster
growth in the Vodka segment and
strong competition in US Whiskey
and Tequila
Growth driven by 2 key geographies:
China and India, where Pernod
enjoys a leading position. Excellent
Cognac brand positioning in China
Continued strong growth in Eastern
Europe partly offset with lower
performance in Western Europe (e.g.
wine in Spain)
6
Financial Performance Analysis
SALES ANALYSIS
Breakdown by International Brands (pre Covid-19, in 9Lcs millions)
YOY Volume change resulting from the Covid-19 pandemic
COST AND MARGIN ANALYSIS
Gross Profit (in €m) and Margin Evolution
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) from last available financial report
11.1
7.7 7.6
4.6 4.5 4.4
3.7 3.2 2.6
1.2 0.7 0.3 0.2
1 2 3 4 5 6 7 8 9 10 11 12 13
(2%) 0%1% 11%6% 15%2% (2%) 8%7% (2%) 8% (2%)
Volume change vs. 2018 Price change vs. 2018
(1%) 6%(1%) 8%(0%) 1%3% 1% 1%(1%) (1%) (1%) 3%
5,371 5,603 5,604
5,649
5,087
2016A 2017A 2018A 2019A 2020A
▪ Growing Gross Profit from 2016A to 2019A with a
CAGR of 1.7%
▪ The historical average Gross Profit Margin amounts
to ~62%
▪ On average, Cost of Sales amounts to ~38% of
Sales in line with peers:
− Diageo: 61.4%(1)
− Campari: 61.9%(1)
− Cointreau: 66.1%(1)
61.9% 60.2%62.2% 62.4% 61.5%
% of Sales
(7%)
(2%)
(5%)
(8%)
(19%)
(6%)
5%
(4%)
(24%)
(3%)
(13%)
(21%)
(7%)
7
Financial Performance Analysis
Advertising & Promotion Expense (in €m) Evolution
Structure Costs (in €m) Evolution
EBITDA ANALYSIS
EBITDA (in €m) and Margin Evolution
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) from last available financial report
▪ Growing EBITDA from 2016A to 2019A with
a CAGR of 4.0%
▪ As a result of the Covid-19, EBITDA
decreased in 2020A (7.0%) vs. 2019A
28.7% 30.9%29.0% 28.6% 30.6%
2,496
2,614 2,574
2,807
2,611
2016A 2017A 2018A 2019A 2020A
1,646 1,691 1,720
1,512
1,327
2016A 2017A 2018A 2019A 2020A
▪ Decreasing Advertising & Promotion Expense from
2016A to 2019A with a CAGR of (2.8%)
▪ On average, Advertising & Promotion Expense
amounts to ~18% of Sales, in line with peers:
− Campari: 17.4%(1)
− Cointreau: 18.0%(1)
19.0% 15.7%18.8% 19.1% 16.5%
1,448 1,517
1,526 1,556 1,499
2016A 2017A 2018A 2019A 2020A
▪ Growing Cost Structure from 2016A to 2019A
with a CAGR of 2.4%
▪ On average, Structure Cost amounts to ~17%
of Sales, above peers
16.7% 17.7%16.8% 17.0% 16.9%
% of Sales
% of Sales
% of Sales
8
Financial Performance Analysis
LEVERAGE ANALYSIS
Net Debt (in €m) and Net Debt/EBIDTA Evolution
Debt Maturity at 30-Jun-20 (in €bn)
LIQUIDITY AND SOLVENCY ANALYSIS
▪ Strong liquidity position at ~€5.3bn as of 30-Jun-20 of which €3.4bn undrawn credit lines
▪ In April 2020, Pernod Ricard successfully completed a €1.5bn in 2 tranches maturing respectively in 2025 and
2030, taking advantage of strong market conditions;
− The transaction was well received by the market, with an orderbook above €5.5bn for a total issue size of
€1.5bn;
▪ In September 2020, Pernod Ricard successfully completed a $2bn bond issuance in 3 tranches maturing
respectively in 2028, 2031 and 2050;
− The favorable market conditions allowed Pernod Ricard to price the issuance at an average coupon of 1.79%
and an average maturity of 14.5 years;
− The net proceeds of this issuance will be used for general corporate purposes, including the full or partial
redemption of the existing $500m notes due Apr-21 and $1,500m notes due Jan-22; The coupon difference
between the newly-issued debt and the one to be redeemed will generate interest savings.
Sources: Company Website, Investor Relations, Broker Reports
8,716
7,851
6,962 6,620
8,424
2016A 2017A 2018A 2019A 2020A
▪ Higher leverage at 30-Jun-20 due mainly to lower FCF linked to Covid-19 as well as an increase in share buybacks,
dividends and dynamic M&A
3.5x 3.2x3.0x 2.7x 2.4x 3.2x2.4
6,620
8,424
(830) 1,113
849
603
69
▪ 52% of gross debt denominated in € and 48% denominated in $
▪ Very limited upcoming maturities vs. Cash generation; no near-term pressure to refinance the capital structure
▪ No major liquidity issues as Pernod Ricard successfully issued bonds in Apr-20 and Sep-21 under favorable
markets conditions to restructure its upcoming maturity
0.6
1.3
0.7
1.0
1.7
1.1
0.5
1.0
0.5
0.8
0.3
0.3
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 … 2042
Other debts
Com. Paper
Bonds
To be refinanced with
bond issued in Sep-20
9
Financial Modeling and Valuation Analysis | Broker Consensus
BROKER CONSENSUS
Sources: Company Website, Investor Relations, Broker Reports
Broker Recommendation Target Price (€) Date
Buy 180.00 26-Nov-20
Hold 172.00 25-Nov-20
Buy 166.00 25-Nov-20
Buy 175.00 13-Nov-20
Hold 135.00 23-Oct-20
Hold 140.00 23-Oct-20
Buy 168.00 23-Oct-20
Hold 135.00 22-Oct-20
Hold 145.00 22-Oct-20
Buy 170.00 22-Oct-20
Buy 164.00 22-Oct-20
Buy 174.00 22-Oct-20
Target Price Range 135.00 – 180.00
12M Average Target Price 160.33
Buy 7 recommendations
Hold 5 recommendations
▪ Currently, Pernod Ricard is trading at €159.7. The market is mixed between and overweight and neutral for the
stock, meaning that analysts believe that Pernod Ricard shares are currently trading at the intrinsic price or at a
price slightly below their intrinsic value.
10
Financial Modeling and Valuation analysis | DCF
DISCOUNTED CASH FLOW METHOD
Operating Assumptions
After careful examination of Pernod Ricard’s past performance, financial statements, analysts’ forecasts and
macroeconomic outlook, we formulated the following expectations over the DCF forecast period:
Financial Projections
Sources: Company Website, Investor Relations, Broker Reports
DCF Items Comments
Net Sales
Sales expected to reach pre-crisis level by 2022 and to grow at 5.5% as per Pernod
Ricard’s medium-term ambition stated in the Transform & Accelerate Plan
Cost of Sales (% of sales) Cost of Sales expected to linearly stabilize to 39% of sales, the historical average
Ad. & Prom. Exp. (% of sales)
Ad. & Prom. Expense expected to linearly stabilize to 16% of sales as per Pernod Ricard’s
medium-term ambition stated in the Transform & Accelerate Plan and in line with peers
Structure costs (% of sales)
Structure costs expected to linearly stabilize to 16% of sales as per Pernod Ricard’s
medium-term ambition stated in the Transform & Accelerate Plan and in line with peers
D&A (% of sales) D&A expected to remain fixed at 4% of sales
Tax Rate
No visibility on potential changes in fiscal consideration. Historical average effective tax
rate paid by the firm of 25% is used in the model.
Working Cap. (% of sales) Working Cap. expected to linearly stabilize to 2.3% of sales, in line with historical level
Capex (% of sales) Capex. expected to linearly stabilize to 4% of sales, in line with historical level
Capital Structure Current capital structure expected to remain unchanged (82%/18%)
These assumptions yield 33% EBITDA margin and 29% EBIT margin by 2026E, catching up on Diageo
Actual Predicted
(€m) 2017A 2018A 2019A 2020A 2021E 2022E 2023E 2024E 2025E 2026E
Net Sales 9,010 8,987 9,182 8,448 8,448 9,182 9,907 10,609 11,277 11,898
Growth (%) n.a. (0.3%) 2.2% (8.0%) 0.0% 8.7% 7.9% 7.1% 6.3% 5.5%
Cost of Sales (3,407) (3,383) (3,533) (3,361) (3,361) (3,653) (3,922) (4,179) (4,420) (4,640)
as % of Sales (abs.) 37.8% 37.6% 38.5% 39.8% 39.8% 39.8% 39.6% 39.4% 39.2% 39.0%
Contributive Margin 5,603 5,604 5,649 5,087 5,087 5,529 5,985 6,430 6,857 7,258
as % of Sales 62.2% 62.4% 61.5% 60.2% 60.2% 60.2% 60.4% 60.6% 60.8% 61.0%
Ad. & Prom. Exp. (1,691) (1,720) (1,512) (1,327) (1,327) (1,442) (1,563) (1,682) (1,796) (1,904)
as % of Sales (abs.) 18.8% 19.1% 16.5% 15.7% 15.7% 15.7% 15.8% 15.9% 15.9% 16.0%
Structure costs (1,517) (1,526) (1,556) (1,499) (1,499) (1,629) (1,715) (1,790) (1,854) (1,904)
as % of Sales (abs.) 16.8% 17.0% 16.9% 17.7% 17.7% 17.7% 17.3% 16.9% 16.4% 16.0%
EBIT 2,395 2,358 2,581 2,261 2,261 2,457 2,707 2,958 3,207 3,450
Margin (%) 26.6% 26.2% 28.1% 26.8% 26.8% 26.8% 27.3% 27.9% 28.4% 29.0%
D&A (219) (216) (226) (350) (350) (380) (406) (429) (451) (476)
as % of Sales (abs.) 2.4% 2.4% 2.5% 4.1% 4.1% 4.1% 4.1% 4.0% 4.0% 4.0%
EBITDA 2,614 2,574 2,807 2,611 2,611 2,838 3,112 3,388 3,659 3,926
Margin (%) 29.0% 28.6% 30.6% 30.9% 30.9% 30.9% 31.4% 31.9% 32.4% 33.0%
CAPEX (367) (374) (363) (364) (364) (396) (417) (435) (451) (476)
as % of Sales (abs.) 4.1% 4.2% 4.0% 4.3% 4.3% 4.3% 4.2% 4.1% 4.0% 4.0%
Change in W Cap. (79) (100) (181) (433) (385) (367) (340) (304) (259) (274)
as % of Sales (abs.) 0.9% 1.1% 2.0% 5.1% 4.6% 4.0% 3.4% 2.9% 2.3% 2.3%
11
Financial Modeling and Valuation analysis | DCF
DISCOUNTED CASH FLOW METHOD
WACC Calculation
DCF Calculation
Sources: Company Website, Investor Relations, Broker Reports
Comments
Risk-free rate 0.59% Blended risk-free rate (American and French 10-year government bond)
Beta 0.78 Bloomberg adjusted Beta (levered)
Market Risk Premium 5.35% Equity risk premium as of Nov-20 (Damodaran)
Country Risk Premium 1.89% Blended country risk premium based on geographical exposure (Damodaran)
Cost of Equity 6.68%
Tax Rate 25% Historical effective tax rate
Cost of Debt 3.00% 10-year Eurobond yield issued in April adjusted upward to reflect the historical cost of debt
E/(D+E) 84.15% Calculated based on market capitalization as of 27-nov-20 and
estimated net debt as of Nov-20D/(D+E) 15.85%
WACC 5.97%
(in €m) 2021E 2022E 2023E 2024E 2025E 2026E Norm.
yearFYE 30-Jun-21 30-Jun-22 30-Jun-23 30-Jun-24 30-Jun-25 30-Jun-26
Net Sales 8,448 9,182 9,907 10,609 11,277 11,898 11,539
EBITDA 2,611 2,838 3,112 3,388 3,659 3,926 3,772
EBIT 2,261 2,457 2,707 2,958 3,207 3,450 3,310
NOPAT 1,696 1,843 2,030 2,219 2,406 2,588 2,483
D&A 350 380 406 429 451 476 462
Capex (364) (396) (417) (435) (451) (476) (462)
Change in working cap (385) (367) (340) (304) (259) (274) 265)
Free Cash Flow 1,296 1,461 1,679 1,909 2,146 2,314 2,217
% of FCF 58% 100% 100% 100% 100% 42% 100%
Discount Period 0.58 1.00 1.00 1.00 1.00 0.42 1.00
Mid-year convention 0.29 1.29 2.29 3.29 4.29 4.71 5.00
Discount Factor 0.98 0.93 0.88 0.83 0.78 0.76 0.75
Discounted FCF 737 1,356 1,470 1,577 1,673 744 1,659
12
Financial Modeling and Valuation analysis | DCF
DCF Output
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) last 10-year average NTM EV/EBITDA multiple in the Spirit industry
DCF Assumptions
Valuation Date 01-Dec-20
Tax Rate 25.0%
WACC 5.97%
Perpetual Growth Rate 2.50%
▪ The PGR method concludes that the stock price is undervalued by €25, meaning that Pernod Ricard shares are
currently trading below their intrinsic value
▪ EBITDA Exit Multiple method, used as a cross-check, results in an undervalued stock price by €16
▪ These results are highly sensitive to the WACC and the PGR (+85% of the EV lies in the Terminal Value)
Implied Share Price Sensitivity
Terminal Value Sensitivity
### 2.00% 2.25% 2.50% 2.75% 3.00%
5.00% 75,381 82,436 90,901 101,247 114,181
5.50% 64,613 69,753 75,751 82,839 91,344
5.97% 56,900 60,868 65,407 70,650 76,774
6.50% 50,254 53,341 56,813 60,748 65,246
7.00% 45,229 47,726 50,501 53,602 57,090
Perpetual growth
W
A
C
C
17.3 2.00% 2.25% 2.50% 2.75% 3.00%
5.00% 20.0x 21.9x 24.1x 26.8x 30.3x
5.50% 17.1x 18.5x 20.1x 22.0x 24.2x
5.97% 15.1x 16.1x 17.3x 18.7x 20.4x
6.50% 13.3x 14.1x 15.1x 16.1x 17.3x
7.00% 12.0x 12.7x 13.4x 14.2x 15.1x
Perpetual growth
W
A
C
C
Terminal Value/EBITDA Sensitivity
Implied Share Price Sensitivity
Intrinsic Value
Present Value of FCF 7,557
Terminal Value Cash Flow 2,217
Terminal Value 65,407
Implied Terminal Value/EBITDA 17.3x
Present Value of Terminal Value 48,935
Enterprise value (in €m) 56,492
Net debt 7,876
Non-controlling interest 243
Associates 28
Equity Value (in €m) 48,400
Target Price (€) 184.82
Upside (in %) 16%
DCF Assumptions
Exit EBITDA Multiple(1) 16.1x
Intrinsic Value ²
Norm. year EBITDA 3,866
Terminal Value 62,241
Present Value of Terminal Value 46,556
Enterprise value (in €m) 54,123
Equity Value (in €m) 46,031
Target Price (€) 175.77
Upside (in %) 10%
Terminal Value Sensitivity
### 14.1x 15.1x 16.1x 17.1x 18.1x
2.00% 54,243 58,090 61,937 65,784 69,631
2.25% 54,376 58,232 62,089 65,945 69,802
2.50% 54,509 58,375 62,241 66,106 69,972
2.75% 54,642 58,517 62,392 66,268 70,143
3.00% 54,775 58,659 62,544 66,429 70,314
Exit EBITDA Multiple
P
G
R
### 2.00% 2.25% 2.50% 2.75% 3.00%
5.00% 224.25 245.36 270.69 301.64 340.34
5.50% 187.10 202.12 219.65 240.35 265.21
5.97% 160.51 171.85 184.82 199.80 217.29
6.50% 137.62 146.23 155.90 166.87 179.41
7.00% 120.33 127.13 134.68 143.13 152.62
Perpetual growth
W
A
C
C
### 14.1x 15.1x 16.1x 17.1x 18.1x
5.00% 161.80 173.37 184.94 196.50 208.07
5.50% 157.58 168.88 180.17 191.47 202.76
5.97% 153.68 164.73 175.77 186.82 197.86
6.50% 149.48 160.26 171.03 181.81 192.58
7.00% 145.60 156.12 166.65 177.17 187.70
Exit EBITDA Multiple
W
A
C
C
13
Financial Modeling and Valuation analysis | Trading Comparable
COMPARABLE MULTIPLE METHOD
Assumptions
Comparable Analysis is executed both on operational metrics and valuation metrics. Given the impact of the
pandemics of companies’ financials, we chose to look at both backward forward-looking multiples.
Peer Companies
For the comparable analysis, we will be benchmarking Pernod Ricard against its major publicly listed
competitors: Campari, Diageo and Remy Cointreau.
Average Historical Forward Looking Multiple (EV/NTM EBITDA)
Operating Benchmark(1)
Implied Forward Valuation
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) financial data in €, calendarized
Sales Sales Growth EBITDA EBITDA Margin
Company Country Industry 2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
Spirits 13,780 14,538 15,158 18% 5% 4% 4,726 5,093 5,350 34% 35% 35%
Spirits 1,940 2,072 2,213 8% 7% 7% 488 540 625 25% 26% 28%
Spirits 1,087 1,178 1,284 14% 8% 9% 282 319 363 26% 27% 28%
Spirits 8,815 9,544 10,258 4% 8% 7% 2,688 2,928 3,145 30% 31% 31%
Market Data (€m) EV/Revenue EV/EBITDA
Company Price (€) Shares Outs. Market Cap. LTM Net D. Total EV 2021E 2022E 2023E 2021E 2022E 2023E
32.7 2,335 76,340 15,466 93,665 6.8x 6.4x 6.2x 19.8x 18.4x 17.5x
9.6 1,126 10,754 1,078 11,833 6.1x 5.7x 5.3x 24.2x 21.9x 18.9x
149.4 50 7,500 427 7,928 7.3x 6.7x 6.2x 28.2x 24.9x 21.9x
Mean 6.7x 6.3x 5.9x 24.1x 21.7x 19.4x
Enterprise Value 59,320 60,078 60,529 65,569 64,634 63,173
Equity Value 51,228 51,986 52,438 57,477 56,543 55,082
Implied Share Price 195.60 198.50 200.22 219.46 215.89 210.32
Implied share price applying Diageo Multiples 197.88 203.90 211.14 175.25 178.04 186.35
10.0x
15.0x
20.0x
25.0x
Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20
Diageo Remy Campari Pernod Average
Spot 20.6x 29.3x 25.3x 19.4x 23.7x
LTM 18.3x 25.3x 22.7x 17.0x 20.8x
L3Y 17.8x 22.5x 21.5x 16.5x 19.6x
L5Y 17.3x 21.1x 19.4x 15.6x 18.3x
L10Y 15.5x 18.8x 15.6x 14.4x 16.1x
14
Financial Modeling and Valuation analysis | Precedent Transactions
PRECEDENT TRANSACTIONS METHOD
Assumptions
Precedent Transactions Analysis is based on transactions from the past 20 years in the Spirit industry. We identified
relevant transactions which shaped the industry, selected based on:
▪ Transaction type
▪ Spirit category
▪ Geography
▪ Size
▪ Availability of information
We apply the average multiple on Pernod Ricard’s pre Covid-19 metrics.
Sources: Company Website, Investor Relations, Broker Reports
Target Buyer Transaction LTM ($m) EV/LTM
Company Category Company Date Type EV ($m) Sales EBITDA m 9lc eq. Sales EBITDA 9lc (in $)
Patròn Spirits Tequila Bacardi Jan-20 Single Brand 5,100 671 255 2.2 7.6x 20.0x 2,299
Castle Brands Bourbon Pernod Ricard Aug-19 Portfolio and Market Deal 270 96 7 0.4 2.8x 39.2x 617
19 brands Various Sazerac Nov-18 Portfolio and Market Deal 550 149 n.a. 2.5 3.7x n.a. 221
Pendleton Whisky Whiskey Cuervo Dec-17 Single Brand 205 30 n.a. 0.3 6.8x n.a. 757
Carolans & Irish Mist Whiskey Heaven Hill Jul-17 Single Brand 165 35 8 0.6 4.7x 21.2x 283
Casamigos Tequila Diageo Jun-17 Single Brand 1,000 50 n.a. 0.2 20.0x n.a. 4,762
High West Whiskey Constellation Oct-16 Single Brand 160 22 n.a. 0.1 7.4x n.a. 3,189
Ben Riach Distillery Whiskey Apr-16 Single Brand 414 39 16 n.a. 10.6x 25.1x n.a.
Grand Marnier Liqueur Campari Mar-16 Portfolio and Market Deal 724 168 53 0.9 4.3x 13.7x 819
South Comford & Tuaca Liqueur Sazerac Jan-16 Single Brand 544 259 54 1.8 2.1x 10.0x 300
Beam Whiskey Suntory Jan-14 Portfolio and Market Deal 16,000 2,581 777 7.3 6.2x 20.6x 2,204
United Spirits Various Diageo Nov-12 Portfolio and Market Deal 2,100 189 105 n.a. 11.1x 20.0x n.a.
Mey Icki Nat. Spirits Diageo Feb-11 Portfolio and Market Deal 2,109 490 213 n.a. 4.3x 9.9x n.a.
The Absolut Company Vodka Pernod Ricard Mar-08 Single Brand 8,912 1,747 428 10.6 5.1x 20.8x 837
Ketel One Vodka Diageo Feb-08 Single Brand 1,800 327 95 2.1 5.5x 19.0x 844
Allied Domecq Various Pernod Ricard Apr-05 Portfolio and Market Deal 17,639 6,082 1,336 n.a. 2.9x 13.2x n.a.
Glenmorangie Whiskey LVMH Oct-04 Single Brand 544 124 21 0.3 4.4x 25.7x 1,571
Grey Goose Vodka Bacardi Jun-04 Single Brand 2,293 314 91 1.5 7.3x 25.3x 1,542
Aperol Liqueur Campari Dec-03 Single Brand 180 64 15 0.5 2.8x 11.8x 383
Seagram Various Diageo/Pernod Dec-00 Portfolio and Market Deal 8,150 3,019 647 7.9 2.7x 12.6x 1,030
Statistics EV/Sales EV/EBITDA EV/9lc
Mean
(Total)
6.1x 19.3x 1,354
Mean
(Single Brand)
7.0x 19.9x 1,524
Mean
(Portfolio)
4.8x 18.5x 978
Equity Value (€m)
48,056 45,961 60,943
56,412 47,705 69,646
35,523 43,718 41,797
Implied Share Price (€)
182.03 174.09 230.85
213.68 180.70 263.81
134.56 165.60 158.32
Enterprise Value (€m)
56,148 54,052 69,035
64,504 55,797 77,738
43,615 51,809 49,888
15
VALUATION FOOTBALL FIELD
RECOMMENDATION
We reinstate with a Buy rating and a price target of €180, implying a 13% upside to the current share price.
We note that such price target is at the top end of the other financial analysts’ target prices.
Our price target was derived using a blended valuation approach based on the DCF, trading comparable and
precedent transactions.
The mid-point of the DCF at €185 is at a premium to our price target given it represents the intrinsic value
of the Pernod Ricard stock. We believe Pernod should trade at a premium to Diageo given higher upside
potential in terms of margin and better portfolio positioning, however Remy Cointreau and Campari’s
stronger growth deserve a premium.
171.86
135.00
112.25
199.81
180.00
171.10
Valuation Football Field and Recommendation
Sources: Company Website, Investor Relations, Broker Reports
Current
Share Price
Target
Price
Portfolio &
Market Deal Single Brand
EV/EBITDA
52-week trading range
Current analyst forecast
DCF
PGR @2.25-2.75%
WACC @5.97%
Trading comparable
21E and 22E
Precedent transaction
EV/EBITDA
EV/EBITDA
Mean
Mean
16
Investment Risks
There are several risks that could impact Pernod’s financial profile and our investment thesis.
▪ Pressure on prices – Competition in spirits is intense. In most categories barriers to entry are low
and the industry is rather fragmented.
▪ Weak on-trade environment – Given COVID restrictions and consumers’ more cautious approach
to going out, the on-trade channel could remain subdued for some time. Pernod’s exposure to the on-
trade channel is lower than its peers’, but still relatively high at c25% in the US and in Europe.
▪ Trading down – The spirits category has seen a consistent premiumization trend in developed
markets. Since the pandemic, consumers have continued to trade up. As government income
support/furlough schemes are phased out, trading down could impact Pernod’s sales and profit, in
most markets.
▪ EM macro – Pernod derives c30% of its sales and 20% of its profit from emerging markets
(excluding China). Demand for international spirits in emerging markets tends to be cyclical. In the
current uncertain macro environment, Pernod sales growth in emerging markets could remain weaker
for longer than we anticipate.
▪ Currency risk – Unfavorable FX movements (particularly the EUR/USD and GBP/USD and EUR
against most EM currencies) can have a material impact on profit
▪ US tariffs – The US administration in October 2019 imposed tariffs on certain spirits imported from
Europe. Only a small portion of Pernod’s US sales are subject to tariffs, but (under the current
administration) the scope of the tariffs will be reviewed every six months, which poses the risk that
other brands may be impacted.
▪ Regulatory changes – Alcohol is subject to tax increases from time to time (or regularly, depending
on countries). The risk may be higher over the next few years, as governments will need to “repair”
public finances post COVID.
▪ Loss of major industrial site – Resulting in significant business disruption and unavailability of key
brands in the trade
Sources: Company Website, Investor Relations, Broker Reports 17
Victoire Buiatti
November 30th, 2020
ECO579 – Case Studies in Corporate Finance
Industry: Spirits
BUY
Share Price: €159.70
Price Target: €180.00
PERNOD RICARD
November 30th, 2020
Share Price Performance (€)
Key Financials
Stock Data
Encouraging Q1 despite Covid-19, strong resilience and agility for FY21
SUMMARY
▪ Q1 FY21 in decline but in marked improvement vs. Q4
FY20 thanks to partial on-trade reopening and continued
off-trade resilience
▪ Despite continued uncertainty and volatility expected
during FY21, Pernod is well positioned to navigate the
current environment given the resilience of off-trade in the
US and in Europe, the return to growth in China, and the
gradual improvement in India
▪ We believe sales will return to growth in Q2 FY21
▪ The future is promising with Pernod’s accelerated digital
transformation and strict cost discipline
INVESTMENTS DRIVERS
Pernod is well positioned to navigate the current environment:
▪ Off-trade expected to remain very resilient
▪ Markets to benefit from partial reopening despite the on-
trade channel being still disrupted due to the lockdown
measures
▪ Strong shipments throughout the work ahead of the festive
period
▪ Travel Retail expected to remain in severe decline ((64%)
for Q1 2021) despite some domestic travel resuming
▪ US (+6% sales organic growth for Q1 2021): robust market
with strong off-trade resilience and on-trade reopening
▪ China (+4% sales organic growth for Q1 2021): growth
driven by on-trade recovery and sale ahead of festive
season
▪ India ((13%) sales organic growth for Q1 2021): improving
vs. last quarter but still lagging due to COVID-19
▪ Europe ((5%) sales organic growth for Q1 2021): good
resilience despite the hard hit of the pandemics on Spain
and Russia; strong dynamism in the UK and Germany
VALUATION
▪ Blended valuation methods (discounted cash flows,
precedent transactions, trading comparable) yield a
Target Price of €180.00
Sources: Company Website, Investor Relations, Broker Reports
Share Price (€) 159.70
Date 27-Nov-20
Price Target (€) 180.00
52-Week Range (€) 112.25 - 171.10
Market Cap. (€bn) 41.82
Shares Out (m) 261.88
Free Float 75.00%
Ticker (Reuters) PERP.PA
We reinstate with a Buy rating, €180 PT, 13% upside
30-Jun YE 2019A 2020A 2021E
Net Sales (€m) 9,182 8,448 8,448
EBITDA (€m) 2,807 2,611 2,611
EBITDA Margin 30.6% 30.9% 30.9%
EBIT (€m) 2,581 2,261 2,261
EBIT Margin 28.1% 26.8% 26.8%
Net Income 1,455 329 1,439
Net Debt 6,620 8,424 7,310
Net Debt/EBITDA 2.4x 3.2x 2.8x
Spot 1m 3m 6m 1Y 5Y 10Y
Share Price (€) 159.7 144.8 147.0 141.0 167.0 107.8 64.0
Performance n.a. 10% 9% 13% (4%) 48% 150%
1
Company Overview
A UNIQUE PORTFOLIO OF PREMIUM BRANDS
▪ Founded in 1975 through the merger of two French anise-based spirit companies, Pernod Ricard
became the world's second-largest spirits company, with a strong presence in all regions
▪ Pernod's main markets are the US, China, India and an important exposure to Travel Retail
▪ Its main brands are Martell Cognac, Jameson Irish Whiskey, Absolut Vodka and Chivas Regal Scotch
▪ Pernod Ricard has built a unique portfolio of Premium brands on an international scale that is one of
the most comprehensive on the market. This portfolio is managed centrally thanks to the House of
Brands, a dynamic tools allowing affiliates to more efficiently prioritize marketing investments
KEY PEOPLE
OWNERSHIP STRUCTURE
▪ Pernod Ricard is listed on the Paris Stock Exchange.
▪ The Ricard family is the largest shareholder, through Société Paul Ricard (comprising Société Paul
Ricard, and a number of other entities), which holds shares representing 15.8% of the share capital
and 21.3% of the voting rights
▪ Groupe Bruxelles Lambert is another long-term holder, with a 7.6% shareholding
▪ The Board, Management and employees hold 2.5% of the capital
KEY HIGHLIGHTS
Alexandre Ricard
Chairman and CEO since 2015
▪ Joined Pernod Ricard in 2003
▪ Previous roles: MD of PR
Asia Duty Free, CEO of
Irish Distillers and COO
Hélène de Tissot
CFO since 2018
▪ Joined Pernod Ricard in 2002
▪ Previous roles: Group
Strategy and M&A Director
and CFO of the Asia region
18,776
Employees(1)
94
Production sites(1)
160+
Countries with distribution
€41.8bn
Market Capitalization
#1
for Premium/Prestige Spirits
€8,448m
FY20 Sales
€
#2
for Wine and Spirit
16 Brands
amongst the world’s Top 100
Sources: Company Website, Investor Relations, Broker Reports
Note: (1)as of 30-Jun-20
2
Industry Snapshot and Competitive Positioning
▪ Market fragmentation in the wine & spirit industries is increasing every year with innovation and new
brands creating more offer whilst new sales and communication channels are increasingly used by
customers
▪ To succeed, it is critical to address the right brand in the right place at the right price to the right
customers; firms must master new technology and data to digitize the route-to-consumer and provide
seamless and direct interactions
KEY SECULAR TRENDS
Spirits companies generate +30% of sales from premium products (pre Covid-19)
Spirits companies generate +25% of sales volumes on-trade(1) (pre Covid-19)
Spirits companies generate between 22% and 32% EBIT margin (pre Covid-19)
72%
52%
75%
60%
25%
45%
23%
29%
2%
Pernod Ricard Campari Diageo Remy Cointreau
Off-Trade On-Trade Travel Retail
63% 69% 64%
19%
37% 31% 36%
81%
Discount & Mainstream Premium & above
28%
22%
32%
24%
Pernod Ricard Campari Diageo Remy Cointreau
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) On-Trade sales correspond to B2B (e.g. bars, restaurants) while Off-Trade is B2C (e.g. customers buying in a supermarket
3
Industry Snapshot and Covid-19 Focus
COVID-19 IMPACT
▪ There was significant demand impact from COVID-19, due to both travel-retail and on-premise
channels’ weakness given travel restrictions, social distancing and bar/restaurant closures. We still
expect negative impact from the pandemic in the coming months;
▪ Spirits look more vulnerable in the current environment, where social distancing measures radically
reduce on-trade consumption, while a weaker macro and rising unemployment are likely to depress
consumers' disposable income and eventually lead to downtrading(1);
▪ The lockdown measures did not only impact Europe and the US abut also Emerging Markets; we are
particularly cautious about the demand and the pace of recovery in emerging markets – and it would
be misleading to extrapolate consumer behavior in markets like the UK and US to EM.
Spirits companies had lower leverage compared to 2009
EBIT margin remained resilient during the previous crisis
Recovery to pre Covid-19 level expected to take place in the next 2-3 years
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) downtrading occurs when customers switch from expensive brands to cheaper alternatives
5.4x
2.4x 2.4x
3.2x
2.4x
1.6x
2.9x
1.3x
Pernod Ricard Campari Diageo Remy Cointreau
2009 2019
23%
21%
29%
20%
24%
21%
28%
19%
26%
24%
28%
18%
25%
24%
29%
18%
Pernod Ricard Campari Diageo Remy Cointreau
2007 2008 2009 2010
2019 2024202220212020 2023
Covid-19
4
Investment Case
FASTER RECOVERY THAN THE INDUSTRY
▪ We think Pernod Ricard's premium portfolio (~40% of sales) means it could be vulnerable to downtrading in the
near term, as is the case for most companies in the Spirit industry;
▪ However, in relative terms, we think Pernod Ricard might recover more quickly than peers if consumption starts
improving in China (~10% of net sales);
▪ We do not expect Pernod Ricard to cut costs too significantly, as management focus remains on long-term growth,
but we see a higher margin opportunity in the longer term and a potential to eventually catch-up Diageo’s EBIT
Margin (32%);
▪ In the long term, we highlight that Pernod has some catching up to do to match Diageo's ROIC (7% vs. 12% in
FY19);
▪ The speed of recovery will depend on the pace of normalization in China, growth in Travel Retail, the
extent to which consumers trade-down globally and the impact of the cost-saving measures the company
initiated a few years ago;
▪ We expect a full recovery by 2022 to pre Covid-19 levels and return to growth in the following year.
ACQUISITION STRATEGY PAYING OFF, MORE TO COME
In the next few years, a large acquisition could be the next catalyst for the stock. This could drive synergies as well as
complete the portfolio gaps such as Tequila. If this transaction were to take place, Pernod Ricard could restructure
some of the route-to-market in key geographies such as the United Sates where it has been consistently
underperforming Diageo.
SUCCESFUL PURSUIT OF PORTFOLIO TRANSFORMATION
Pernod today has an enhanced portfolio as a result of a profound transformation over the past five years. Through
numerous bolt-on deals, Pernod has solidified its portfolio with very limited portfolio gaps compared to peers and
further enhanced its global footprint. Pernod enjoys a leading position in Cognac, Vodka and Irish Whiskey, with
identified weakness in the booming Tequila category.
Sources: Company Website, Investor Relations, Broker Reports
Mainstream Scotch
Premium Scotch
US Whiskey
Canadian Whiskey
Irish Whiskey
Indian Whiskey
Mainstream Vodka
Premium Vodka
Cognac
Rum
Gin
Tequila
Baijiu
Liqueurs and others
Wines
Champagnes
5
Financial Performance Analysis
Pernod Ricard’s financial statements are prepared in accordance with IFRS (International Financial
Reporting Standards) as adopted by the European Union. The Group’s financial year runs from July 1st to
June 30th.
The company applies the following accounting principles:
▪ Revenue recognized when control of the product is transferred to the customer;
▪ Inventory stated at the lower of their cost or their net realizable value;
▪ Depreciation of PP&E determined using the straight-line method based on estimated useful life;
▪ Intangible assets (brands) are subject to impairment tests at least once a year;
▪ Research and Development costs are expensed as incurred.
SALES ANALYSIS
Sales Evolution (in €m)
Breakdown and Evolution by Geography
Sources: Company Website, Investor Relations, Broker Reports
8,682
9,010 8,987 9,182
8,448
2016A 2017A 2018A 2019A 2020A
▪ Growing Sales from 2016A to 2019A with a
CAGR of 1.9%
▪ As a result of the Covid-19, revenue decreased
in 2020A (8.0%) vs. 2019A
Americas
28%
Asia
ROW
43%
Europe
29%
2019A
Americas
29%
Asia
ROW
41%
Europe
30%
2020A
Americas
29%
Asia
ROW
40%
Europe
31%
2016A
Americas Asia/ROW Europe
3,498 3,568
3,648
3,966
3,467
2016A 2017A 2018A 2019A 2020A
2,709 2,781 2,793 2,673
2,532
2016A 2017A 2018A 2019A 2020A
2,476
2,661
2,546 2,546
2,449
2016A 2017A 2018A 2019A 2020A
▪ Stable geographic mix
over time
▪ Growing share of
Asia
▪ FY20 results affected
by the early lockdown
measures in Asia in
2019/2020
Underperformance due to lackluster
growth in the Vodka segment and
strong competition in US Whiskey
and Tequila
Growth driven by 2 key geographies:
China and India, where Pernod
enjoys a leading position. Excellent
Cognac brand positioning in China
Continued strong growth in Eastern
Europe partly offset with lower
performance in Western Europe (e.g.
wine in Spain)
6
Financial Performance Analysis
SALES ANALYSIS
Breakdown by International Brands (pre Covid-19, in 9Lcs millions)
YOY Volume change resulting from the Covid-19 pandemic
COST AND MARGIN ANALYSIS
Gross Profit (in €m) and Margin Evolution
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) from last available financial report
11.1
7.7 7.6
4.6 4.5 4.4
3.7 3.2 2.6
1.2 0.7 0.3 0.2
1 2 3 4 5 6 7 8 9 10 11 12 13
(2%) 0%1% 11%6% 15%2% (2%) 8%7% (2%) 8% (2%)
Volume change vs. 2018 Price change vs. 2018
(1%) 6%(1%) 8%(0%) 1%3% 1% 1%(1%) (1%) (1%) 3%
5,371 5,603 5,604
5,649
5,087
2016A 2017A 2018A 2019A 2020A
▪ Growing Gross Profit from 2016A to 2019A with a
CAGR of 1.7%
▪ The historical average Gross Profit Margin amounts
to ~62%
▪ On average, Cost of Sales amounts to ~38% of
Sales in line with peers:
− Diageo: 61.4%(1)
− Campari: 61.9%(1)
− Cointreau: 66.1%(1)
61.9% 60.2%62.2% 62.4% 61.5%
% of Sales
(7%)
(2%)
(5%)
(8%)
(19%)
(6%)
5%
(4%)
(24%)
(3%)
(13%)
(21%)
(7%)
7
Financial Performance Analysis
Advertising & Promotion Expense (in €m) Evolution
Structure Costs (in €m) Evolution
EBITDA ANALYSIS
EBITDA (in €m) and Margin Evolution
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) from last available financial report
▪ Growing EBITDA from 2016A to 2019A with
a CAGR of 4.0%
▪ As a result of the Covid-19, EBITDA
decreased in 2020A (7.0%) vs. 2019A
28.7% 30.9%29.0% 28.6% 30.6%
2,496
2,614 2,574
2,807
2,611
2016A 2017A 2018A 2019A 2020A
1,646 1,691 1,720
1,512
1,327
2016A 2017A 2018A 2019A 2020A
▪ Decreasing Advertising & Promotion Expense from
2016A to 2019A with a CAGR of (2.8%)
▪ On average, Advertising & Promotion Expense
amounts to ~18% of Sales, in line with peers:
− Campari: 17.4%(1)
− Cointreau: 18.0%(1)
19.0% 15.7%18.8% 19.1% 16.5%
1,448 1,517
1,526 1,556 1,499
2016A 2017A 2018A 2019A 2020A
▪ Growing Cost Structure from 2016A to 2019A
with a CAGR of 2.4%
▪ On average, Structure Cost amounts to ~17%
of Sales, above peers
16.7% 17.7%16.8% 17.0% 16.9%
% of Sales
% of Sales
% of Sales
8
Financial Performance Analysis
LEVERAGE ANALYSIS
Net Debt (in €m) and Net Debt/EBIDTA Evolution
Debt Maturity at 30-Jun-20 (in €bn)
LIQUIDITY AND SOLVENCY ANALYSIS
▪ Strong liquidity position at ~€5.3bn as of 30-Jun-20 of which €3.4bn undrawn credit lines
▪ In April 2020, Pernod Ricard successfully completed a €1.5bn in 2 tranches maturing respectively in 2025 and
2030, taking advantage of strong market conditions;
− The transaction was well received by the market, with an orderbook above €5.5bn for a total issue size of
€1.5bn;
▪ In September 2020, Pernod Ricard successfully completed a $2bn bond issuance in 3 tranches maturing
respectively in 2028, 2031 and 2050;
− The favorable market conditions allowed Pernod Ricard to price the issuance at an average coupon of 1.79%
and an average maturity of 14.5 years;
− The net proceeds of this issuance will be used for general corporate purposes, including the full or partial
redemption of the existing $500m notes due Apr-21 and $1,500m notes due Jan-22; The coupon difference
between the newly-issued debt and the one to be redeemed will generate interest savings.
Sources: Company Website, Investor Relations, Broker Reports
8,716
7,851
6,962 6,620
8,424
2016A 2017A 2018A 2019A 2020A
▪ Higher leverage at 30-Jun-20 due mainly to lower FCF linked to Covid-19 as well as an increase in share buybacks,
dividends and dynamic M&A
3.5x 3.2x3.0x 2.7x 2.4x 3.2x2.4
6,620
8,424
(830) 1,113
849
603
69
▪ 52% of gross debt denominated in € and 48% denominated in $
▪ Very limited upcoming maturities vs. Cash generation; no near-term pressure to refinance the capital structure
▪ No major liquidity issues as Pernod Ricard successfully issued bonds in Apr-20 and Sep-21 under favorable
markets conditions to restructure its upcoming maturity
0.6
1.3
0.7
1.0
1.7
1.1
0.5
1.0
0.5
0.8
0.3
0.3
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 … 2042
Other debts
Com. Paper
Bonds
To be refinanced with
bond issued in Sep-20
9
Financial Modeling and Valuation Analysis | Broker Consensus
BROKER CONSENSUS
Sources: Company Website, Investor Relations, Broker Reports
Broker Recommendation Target Price (€) Date
Buy 180.00 26-Nov-20
Hold 172.00 25-Nov-20
Buy 166.00 25-Nov-20
Buy 175.00 13-Nov-20
Hold 135.00 23-Oct-20
Hold 140.00 23-Oct-20
Buy 168.00 23-Oct-20
Hold 135.00 22-Oct-20
Hold 145.00 22-Oct-20
Buy 170.00 22-Oct-20
Buy 164.00 22-Oct-20
Buy 174.00 22-Oct-20
Target Price Range 135.00 – 180.00
12M Average Target Price 160.33
Buy 7 recommendations
Hold 5 recommendations
▪ Currently, Pernod Ricard is trading at €159.7. The market is mixed between and overweight and neutral for the
stock, meaning that analysts believe that Pernod Ricard shares are currently trading at the intrinsic price or at a
price slightly below their intrinsic value.
10
Financial Modeling and Valuation analysis | DCF
DISCOUNTED CASH FLOW METHOD
Operating Assumptions
After careful examination of Pernod Ricard’s past performance, financial statements, analysts’ forecasts and
macroeconomic outlook, we formulated the following expectations over the DCF forecast period:
Financial Projections
Sources: Company Website, Investor Relations, Broker Reports
DCF Items Comments
Net Sales
Sales expected to reach pre-crisis level by 2022 and to grow at 5.5% as per Pernod
Ricard’s medium-term ambition stated in the Transform & Accelerate Plan
Cost of Sales (% of sales) Cost of Sales expected to linearly stabilize to 39% of sales, the historical average
Ad. & Prom. Exp. (% of sales)
Ad. & Prom. Expense expected to linearly stabilize to 16% of sales as per Pernod Ricard’s
medium-term ambition stated in the Transform & Accelerate Plan and in line with peers
Structure costs (% of sales)
Structure costs expected to linearly stabilize to 16% of sales as per Pernod Ricard’s
medium-term ambition stated in the Transform & Accelerate Plan and in line with peers
D&A (% of sales) D&A expected to remain fixed at 4% of sales
Tax Rate
No visibility on potential changes in fiscal consideration. Historical average effective tax
rate paid by the firm of 25% is used in the model.
Working Cap. (% of sales) Working Cap. expected to linearly stabilize to 2.3% of sales, in line with historical level
Capex (% of sales) Capex. expected to linearly stabilize to 4% of sales, in line with historical level
Capital Structure Current capital structure expected to remain unchanged (82%/18%)
These assumptions yield 33% EBITDA margin and 29% EBIT margin by 2026E, catching up on Diageo
Actual Predicted
(€m) 2017A 2018A 2019A 2020A 2021E 2022E 2023E 2024E 2025E 2026E
Net Sales 9,010 8,987 9,182 8,448 8,448 9,182 9,907 10,609 11,277 11,898
Growth (%) n.a. (0.3%) 2.2% (8.0%) 0.0% 8.7% 7.9% 7.1% 6.3% 5.5%
Cost of Sales (3,407) (3,383) (3,533) (3,361) (3,361) (3,653) (3,922) (4,179) (4,420) (4,640)
as % of Sales (abs.) 37.8% 37.6% 38.5% 39.8% 39.8% 39.8% 39.6% 39.4% 39.2% 39.0%
Contributive Margin 5,603 5,604 5,649 5,087 5,087 5,529 5,985 6,430 6,857 7,258
as % of Sales 62.2% 62.4% 61.5% 60.2% 60.2% 60.2% 60.4% 60.6% 60.8% 61.0%
Ad. & Prom. Exp. (1,691) (1,720) (1,512) (1,327) (1,327) (1,442) (1,563) (1,682) (1,796) (1,904)
as % of Sales (abs.) 18.8% 19.1% 16.5% 15.7% 15.7% 15.7% 15.8% 15.9% 15.9% 16.0%
Structure costs (1,517) (1,526) (1,556) (1,499) (1,499) (1,629) (1,715) (1,790) (1,854) (1,904)
as % of Sales (abs.) 16.8% 17.0% 16.9% 17.7% 17.7% 17.7% 17.3% 16.9% 16.4% 16.0%
EBIT 2,395 2,358 2,581 2,261 2,261 2,457 2,707 2,958 3,207 3,450
Margin (%) 26.6% 26.2% 28.1% 26.8% 26.8% 26.8% 27.3% 27.9% 28.4% 29.0%
D&A (219) (216) (226) (350) (350) (380) (406) (429) (451) (476)
as % of Sales (abs.) 2.4% 2.4% 2.5% 4.1% 4.1% 4.1% 4.1% 4.0% 4.0% 4.0%
EBITDA 2,614 2,574 2,807 2,611 2,611 2,838 3,112 3,388 3,659 3,926
Margin (%) 29.0% 28.6% 30.6% 30.9% 30.9% 30.9% 31.4% 31.9% 32.4% 33.0%
CAPEX (367) (374) (363) (364) (364) (396) (417) (435) (451) (476)
as % of Sales (abs.) 4.1% 4.2% 4.0% 4.3% 4.3% 4.3% 4.2% 4.1% 4.0% 4.0%
Change in W Cap. (79) (100) (181) (433) (385) (367) (340) (304) (259) (274)
as % of Sales (abs.) 0.9% 1.1% 2.0% 5.1% 4.6% 4.0% 3.4% 2.9% 2.3% 2.3%
11
Financial Modeling and Valuation analysis | DCF
DISCOUNTED CASH FLOW METHOD
WACC Calculation
DCF Calculation
Sources: Company Website, Investor Relations, Broker Reports
Comments
Risk-free rate 0.59% Blended risk-free rate (American and French 10-year government bond)
Beta 0.78 Bloomberg adjusted Beta (levered)
Market Risk Premium 5.35% Equity risk premium as of Nov-20 (Damodaran)
Country Risk Premium 1.89% Blended country risk premium based on geographical exposure (Damodaran)
Cost of Equity 6.68%
Tax Rate 25% Historical effective tax rate
Cost of Debt 3.00% 10-year Eurobond yield issued in April adjusted upward to reflect the historical cost of debt
E/(D+E) 84.15% Calculated based on market capitalization as of 27-nov-20 and
estimated net debt as of Nov-20D/(D+E) 15.85%
WACC 5.97%
(in €m) 2021E 2022E 2023E 2024E 2025E 2026E Norm.
yearFYE 30-Jun-21 30-Jun-22 30-Jun-23 30-Jun-24 30-Jun-25 30-Jun-26
Net Sales 8,448 9,182 9,907 10,609 11,277 11,898 11,539
EBITDA 2,611 2,838 3,112 3,388 3,659 3,926 3,772
EBIT 2,261 2,457 2,707 2,958 3,207 3,450 3,310
NOPAT 1,696 1,843 2,030 2,219 2,406 2,588 2,483
D&A 350 380 406 429 451 476 462
Capex (364) (396) (417) (435) (451) (476) (462)
Change in working cap (385) (367) (340) (304) (259) (274) 265)
Free Cash Flow 1,296 1,461 1,679 1,909 2,146 2,314 2,217
% of FCF 58% 100% 100% 100% 100% 42% 100%
Discount Period 0.58 1.00 1.00 1.00 1.00 0.42 1.00
Mid-year convention 0.29 1.29 2.29 3.29 4.29 4.71 5.00
Discount Factor 0.98 0.93 0.88 0.83 0.78 0.76 0.75
Discounted FCF 737 1,356 1,470 1,577 1,673 744 1,659
12
Financial Modeling and Valuation analysis | DCF
DCF Output
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) last 10-year average NTM EV/EBITDA multiple in the Spirit industry
DCF Assumptions
Valuation Date 01-Dec-20
Tax Rate 25.0%
WACC 5.97%
Perpetual Growth Rate 2.50%
▪ The PGR method concludes that the stock price is undervalued by €25, meaning that Pernod Ricard shares are
currently trading below their intrinsic value
▪ EBITDA Exit Multiple method, used as a cross-check, results in an undervalued stock price by €16
▪ These results are highly sensitive to the WACC and the PGR (+85% of the EV lies in the Terminal Value)
Implied Share Price Sensitivity
Terminal Value Sensitivity
### 2.00% 2.25% 2.50% 2.75% 3.00%
5.00% 75,381 82,436 90,901 101,247 114,181
5.50% 64,613 69,753 75,751 82,839 91,344
5.97% 56,900 60,868 65,407 70,650 76,774
6.50% 50,254 53,341 56,813 60,748 65,246
7.00% 45,229 47,726 50,501 53,602 57,090
Perpetual growth
W
A
C
C
17.3 2.00% 2.25% 2.50% 2.75% 3.00%
5.00% 20.0x 21.9x 24.1x 26.8x 30.3x
5.50% 17.1x 18.5x 20.1x 22.0x 24.2x
5.97% 15.1x 16.1x 17.3x 18.7x 20.4x
6.50% 13.3x 14.1x 15.1x 16.1x 17.3x
7.00% 12.0x 12.7x 13.4x 14.2x 15.1x
Perpetual growth
W
A
C
C
Terminal Value/EBITDA Sensitivity
Implied Share Price Sensitivity
Intrinsic Value
Present Value of FCF 7,557
Terminal Value Cash Flow 2,217
Terminal Value 65,407
Implied Terminal Value/EBITDA 17.3x
Present Value of Terminal Value 48,935
Enterprise value (in €m) 56,492
Net debt 7,876
Non-controlling interest 243
Associates 28
Equity Value (in €m) 48,400
Target Price (€) 184.82
Upside (in %) 16%
DCF Assumptions
Exit EBITDA Multiple(1) 16.1x
Intrinsic Value ²
Norm. year EBITDA 3,866
Terminal Value 62,241
Present Value of Terminal Value 46,556
Enterprise value (in €m) 54,123
Equity Value (in €m) 46,031
Target Price (€) 175.77
Upside (in %) 10%
Terminal Value Sensitivity
### 14.1x 15.1x 16.1x 17.1x 18.1x
2.00% 54,243 58,090 61,937 65,784 69,631
2.25% 54,376 58,232 62,089 65,945 69,802
2.50% 54,509 58,375 62,241 66,106 69,972
2.75% 54,642 58,517 62,392 66,268 70,143
3.00% 54,775 58,659 62,544 66,429 70,314
Exit EBITDA Multiple
P
G
R
### 2.00% 2.25% 2.50% 2.75% 3.00%
5.00% 224.25 245.36 270.69 301.64 340.34
5.50% 187.10 202.12 219.65 240.35 265.21
5.97% 160.51 171.85 184.82 199.80 217.29
6.50% 137.62 146.23 155.90 166.87 179.41
7.00% 120.33 127.13 134.68 143.13 152.62
Perpetual growth
W
A
C
C
### 14.1x 15.1x 16.1x 17.1x 18.1x
5.00% 161.80 173.37 184.94 196.50 208.07
5.50% 157.58 168.88 180.17 191.47 202.76
5.97% 153.68 164.73 175.77 186.82 197.86
6.50% 149.48 160.26 171.03 181.81 192.58
7.00% 145.60 156.12 166.65 177.17 187.70
Exit EBITDA Multiple
W
A
C
C
13
Financial Modeling and Valuation analysis | Trading Comparable
COMPARABLE MULTIPLE METHOD
Assumptions
Comparable Analysis is executed both on operational metrics and valuation metrics. Given the impact of the
pandemics of companies’ financials, we chose to look at both backward forward-looking multiples.
Peer Companies
For the comparable analysis, we will be benchmarking Pernod Ricard against its major publicly listed
competitors: Campari, Diageo and Remy Cointreau.
Average Historical Forward Looking Multiple (EV/NTM EBITDA)
Operating Benchmark(1)
Implied Forward Valuation
Sources: Company Website, Investor Relations, Broker Reports
Note: (1) financial data in €, calendarized
Sales Sales Growth EBITDA EBITDA Margin
Company Country Industry 2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
Spirits 13,780 14,538 15,158 18% 5% 4% 4,726 5,093 5,350 34% 35% 35%
Spirits 1,940 2,072 2,213 8% 7% 7% 488 540 625 25% 26% 28%
Spirits 1,087 1,178 1,284 14% 8% 9% 282 319 363 26% 27% 28%
Spirits 8,815 9,544 10,258 4% 8% 7% 2,688 2,928 3,145 30% 31% 31%
Market Data (€m) EV/Revenue EV/EBITDA
Company Price (€) Shares Outs. Market Cap. LTM Net D. Total EV 2021E 2022E 2023E 2021E 2022E 2023E
32.7 2,335 76,340 15,466 93,665 6.8x 6.4x 6.2x 19.8x 18.4x 17.5x
9.6 1,126 10,754 1,078 11,833 6.1x 5.7x 5.3x 24.2x 21.9x 18.9x
149.4 50 7,500 427 7,928 7.3x 6.7x 6.2x 28.2x 24.9x 21.9x
Mean 6.7x 6.3x 5.9x 24.1x 21.7x 19.4x
Enterprise Value 59,320 60,078 60,529 65,569 64,634 63,173
Equity Value 51,228 51,986 52,438 57,477 56,543 55,082
Implied Share Price 195.60 198.50 200.22 219.46 215.89 210.32
Implied share price applying Diageo Multiples 197.88 203.90 211.14 175.25 178.04 186.35
10.0x
15.0x
20.0x
25.0x
Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20
Diageo Remy Campari Pernod Average
Spot 20.6x 29.3x 25.3x 19.4x 23.7x
LTM 18.3x 25.3x 22.7x 17.0x 20.8x
L3Y 17.8x 22.5x 21.5x 16.5x 19.6x
L5Y 17.3x 21.1x 19.4x 15.6x 18.3x
L10Y 15.5x 18.8x 15.6x 14.4x 16.1x
14
Financial Modeling and Valuation analysis | Precedent Transactions
PRECEDENT TRANSACTIONS METHOD
Assumptions
Precedent Transactions Analysis is based on transactions from the past 20 years in the Spirit industry. We identified
relevant transactions which shaped the industry, selected based on:
▪ Transaction type
▪ Spirit category
▪ Geography
▪ Size
▪ Availability of information
We apply the average multiple on Pernod Ricard’s pre Covid-19 metrics.
Sources: Company Website, Investor Relations, Broker Reports
Target Buyer Transaction LTM ($m) EV/LTM
Company Category Company Date Type EV ($m) Sales EBITDA m 9lc eq. Sales EBITDA 9lc (in $)
Patròn Spirits Tequila Bacardi Jan-20 Single Brand 5,100 671 255 2.2 7.6x 20.0x 2,299
Castle Brands Bourbon Pernod Ricard Aug-19 Portfolio and Market Deal 270 96 7 0.4 2.8x 39.2x 617
19 brands Various Sazerac Nov-18 Portfolio and Market Deal 550 149 n.a. 2.5 3.7x n.a. 221
Pendleton Whisky Whiskey Cuervo Dec-17 Single Brand 205 30 n.a. 0.3 6.8x n.a. 757
Carolans & Irish Mist Whiskey Heaven Hill Jul-17 Single Brand 165 35 8 0.6 4.7x 21.2x 283
Casamigos Tequila Diageo Jun-17 Single Brand 1,000 50 n.a. 0.2 20.0x n.a. 4,762
High West Whiskey Constellation Oct-16 Single Brand 160 22 n.a. 0.1 7.4x n.a. 3,189
Ben Riach Distillery Whiskey Apr-16 Single Brand 414 39 16 n.a. 10.6x 25.1x n.a.
Grand Marnier Liqueur Campari Mar-16 Portfolio and Market Deal 724 168 53 0.9 4.3x 13.7x 819
South Comford & Tuaca Liqueur Sazerac Jan-16 Single Brand 544 259 54 1.8 2.1x 10.0x 300
Beam Whiskey Suntory Jan-14 Portfolio and Market Deal 16,000 2,581 777 7.3 6.2x 20.6x 2,204
United Spirits Various Diageo Nov-12 Portfolio and Market Deal 2,100 189 105 n.a. 11.1x 20.0x n.a.
Mey Icki Nat. Spirits Diageo Feb-11 Portfolio and Market Deal 2,109 490 213 n.a. 4.3x 9.9x n.a.
The Absolut Company Vodka Pernod Ricard Mar-08 Single Brand 8,912 1,747 428 10.6 5.1x 20.8x 837
Ketel One Vodka Diageo Feb-08 Single Brand 1,800 327 95 2.1 5.5x 19.0x 844
Allied Domecq Various Pernod Ricard Apr-05 Portfolio and Market Deal 17,639 6,082 1,336 n.a. 2.9x 13.2x n.a.
Glenmorangie Whiskey LVMH Oct-04 Single Brand 544 124 21 0.3 4.4x 25.7x 1,571
Grey Goose Vodka Bacardi Jun-04 Single Brand 2,293 314 91 1.5 7.3x 25.3x 1,542
Aperol Liqueur Campari Dec-03 Single Brand 180 64 15 0.5 2.8x 11.8x 383
Seagram Various Diageo/Pernod Dec-00 Portfolio and Market Deal 8,150 3,019 647 7.9 2.7x 12.6x 1,030
Statistics EV/Sales EV/EBITDA EV/9lc
Mean
(Total)
6.1x 19.3x 1,354
Mean
(Single Brand)
7.0x 19.9x 1,524
Mean
(Portfolio)
4.8x 18.5x 978
Equity Value (€m)
48,056 45,961 60,943
56,412 47,705 69,646
35,523 43,718 41,797
Implied Share Price (€)
182.03 174.09 230.85
213.68 180.70 263.81
134.56 165.60 158.32
Enterprise Value (€m)
56,148 54,052 69,035
64,504 55,797 77,738
43,615 51,809 49,888
15
VALUATION FOOTBALL FIELD
RECOMMENDATION
We reinstate with a Buy rating and a price target of €180, implying a 13% upside to the current share price.
We note that such price target is at the top end of the other financial analysts’ target prices.
Our price target was derived using a blended valuation approach based on the DCF, trading comparable and
precedent transactions.
The mid-point of the DCF at €185 is at a premium to our price target given it represents the intrinsic value
of the Pernod Ricard stock. We believe Pernod should trade at a premium to Diageo given higher upside
potential in terms of margin and better portfolio positioning, however Remy Cointreau and Campari’s
stronger growth deserve a premium.
171.86
135.00
112.25
199.81
180.00
171.10
Valuation Football Field and Recommendation
Sources: Company Website, Investor Relations, Broker Reports
Current
Share Price
Target
Price
Portfolio &
Market Deal Single Brand
EV/EBITDA
52-week trading range
Current analyst forecast
DCF
PGR @2.25-2.75%
WACC @5.97%
Trading comparable
21E and 22E
Precedent transaction
EV/EBITDA
EV/EBITDA
Mean
Mean
16
Investment Risks
There are several risks that could impact Pernod’s financial profile and our investment thesis.
▪ Pressure on prices – Competition in spirits is intense. In most categories barriers to entry are low
and the industry is rather fragmented.
▪ Weak on-trade environment – Given COVID restrictions and consumers’ more cautious approach
to going out, the on-trade channel could remain subdued for some time. Pernod’s exposure to the on-
trade channel is lower than its peers’, but still relatively high at c25% in the US and in Europe.
▪ Trading down – The spirits category has seen a consistent premiumization trend in developed
markets. Since the pandemic, consumers have continued to trade up. As government income
support/furlough schemes are phased out, trading down could impact Pernod’s sales and profit, in
most markets.
▪ EM macro – Pernod derives c30% of its sales and 20% of its profit from emerging markets
(excluding China). Demand for international spirits in emerging markets tends to be cyclical. In the
current uncertain macro environment, Pernod sales growth in emerging markets could remain weaker
for longer than we anticipate.
▪ Currency risk – Unfavorable FX movements (particularly the EUR/USD and GBP/USD and EUR
against most EM currencies) can have a material impact on profit
▪ US tariffs – The US administration in October 2019 imposed tariffs on certain spirits imported from
Europe. Only a small portion of Pernod’s US sales are subject to tariffs, but (under the current
administration) the scope of the tariffs will be reviewed every six months, which poses the risk that
other brands may be impacted.
▪ Regulatory changes – Alcohol is subject to tax increases from time to time (or regularly, depending
on countries). The risk may be higher over the next few years, as governments will need to “repair”
public finances post COVID.
▪ Loss of major industrial site – Resulting in significant business disruption and unavailability of key
brands in the trade
Sources: Company Website, Investor Relations, Broker Reports 17
