First Berlin Equity Research has published a research update on Schloss Wachenheim AG (ISIN: DE0007229007). Analyst Simon Scholes reiterated his BUY rating and maintained his EUR 22.00 price target.
Sales rose by 4.7% to €102.7m in Q1 23/24 (FBe: €103.5m; Q1 22/23: €98.0m) as SWA implemented price increases to compensate for rising raw material, personnel and energy costs. Overall volume fell 7.3% to 52.9m bottles (Q1 22/23: 57.0m bottles) and EBIT was also lower at €6.5m (FBe: €6.6m; Q1 22/23: €8.3m). Y-o-y comparisons were impacted by a strong Q1 22/23, which partially benefitted from lower-priced raw wine deriving from the plentiful 2020 harvest. The first quarter of SWA’s financial year usually accounts for less than a quarter of annual sales whereas the Christmas quarter contributes around a third of sales and half of annual profit. Encouragingly, on the basis of an easier y-o-y comparison, recent wage and salary increases for consumers, and declining inflation, management expects sales and volume growth to strengthen in the current quarter. Full-year 2023/24 guidance, first given in the annual report in September, is unchanged. It calls for a 6-9% increase in group sales driven mainly by price increases, as volume is seen as stable to lower. EBIT is expected to come in at €28m-€30m (2022/23 €27.4m). Adjusted for restructuring charges at the France segment (€1.2m this year, €4.4m last year), this comparison becomes €29.2m-€31.2m (2022/23: €31.8m). Inflation is now subsiding, and during the coming quarters we expect this to feed through to lower interest rates and improving consumer sentiment. We maintain our Buy recommendation and price target of €22.00.