First Berlin – Schloss Wachenheim AG Research Update (19/02/2021)

First Berlin Equity Research has published a research update on Schloss Wachenheim AG (ISIN: DE0007229007). Analyst Simon Scholes reiterated his BUY rating and increased the price target from EUR 20.00 to EUR 21.00.

Q2 sales at €117.9m (Q2 19/20: €118.6m; FBe: €115.5m) were only slightly (0.6%) below the prior year period figure, while EBIT, which jumped 23.2% to €15.6m (Q2 19/20: €12.7m; FBe: €14.5m) was 7.7% above our forecast. The German market accounted for most of the difference between the reported result and our forecast. Organic volume growth in Germany was negative during the prior year quarter but in Q2 20/21 came in at 10.4% with positive contributions from both branded and private label products. Profitability across the group was helped by reduced advertising expenditure (a €3.5m cut during the first six months) as well as by tight control of other operating costs in Germany and France. Consumer sentiment has deteriorated since Christmas and hotels and restaurants are unlikely to make a full return as clients in the near term. Nevertheless, robust performance during the critical Christmas quarter has prompted management to raise guidance for full-year EBIT and profit before minorities to €19.5m–€21.5m (previously: €18.0m–€20.0m) and €13.5m–€15.5m (previously: €12.5m–€14.5m) respectively. Full-year guidance for stable sales and volume remains unchanged. Based on these upward revisions, we have raised our price target from €20.00 to €21.00. Our recommendation is to Buy the share now for post-pandemic recovery.