First Berlin – Schloss Wachenheim AG Research Update (16/05/2018)

First Berlin Equity Research has published a research update on Schloss Wachenheim AG (ISIN: DE0007229007). Analyst Simon Scholes reiterated his ADD rating and maintained his EUR 22.50 price target.

Overall Q3 2017/18 performance was close to our expectations showing a 13.4% increase in sales to €64.2m (Q3 16/17: €56.6m) while EBIT declined 10.9% to €1.4m (Q3 16/17: €1.6m). Lower profitability in Germany and France outweighed stronger performance in East Central Europe. Group sales and EBIT were up 8.5% and 6.8% respectively at the nine months stage however, and Schloss Wachenheim remains on track to reach the 2017/18 guidance given in the 2016/17 annual report that sales growth will outstrip a slight rise in volume and that the operating profit will increase slightly. Thanks to the strength of the business in wine and sparkling wine in Poland and in brandy in both Poland and Romania, East Central Europe looks set to supplant France as the most profitable of the group's three geographic segments in operating margin terms this financial year. In the light of recent results, we have made downward adjustments to our forecasts for the German and French segments, but have revised up our projections for East Central Europe. However, the net effect of these changes on our valuation is negligible and we leave our price target unchanged at €22.50. We retain our Add recommendation.