Executive Summary At the time of writing, Laurent-Perrier trades at €119 per share, with a market cap of €704 million and an enterprise value of €908 million, factoring in 5.92 million outstanding shares and €204 million in net debt. FY22 earnings stand at €9.89 per share, and H1/23 reports €6.52 per share (versus €6.34 in H1/22). The FY22 PE ratio is 12x compared to its historical mean of 20x (going back to 2006). Comparatively, industry peers like Rémy Cointreau (17x FY22 PE - 27x LTM), Pernod Ricard (17x FY22 PE), Davide Campari (34x FY22 PE), and LVMH (22x FY22 PE) exhibit significantly higher valuations.
Nice article! A crital note though. Historical profitability has been a lot lower than the recent good years. Wine production historically has not been a business with good returns. That being said it is an interesting company. If they really can keep increasing margins and volume the current price is a steal.
You're correct about the recent positive developments in profitability. It's justified to question the sustainability and potential for further improvement in profitability. I attribute this success to the effective implementation of the premiumization strategy. The gradual increase in gross margin since 2009, coupled with increased sales (driven by better price/mix rather than volume growth) and operating leverage, have significantly improved the operating margin. But it's for sure something to look out for going forward.
I will have to do more in-depth research to get comfortable that profits are indeed sustainable. I do like the premiumization strategy very much. Growing wine production is a capital-intensive activity with low returns on capital. Given the limits on Champagne production and their strategy, this risk is mitigated.
Is not specifically disclosed but China exposure is very small. China is a very small Champagne market in general. Iirc only 2.2 million bottles were exported to China in 2022 in total (all brands). That's compared to 34 million bottles for US and 28 million bottles for UK - the two largest export markets. I think China is not even in the Top 10 export markets without Hong Kong and Taiwan.
An interesting idea and succinct write-up. But your assumptions seem far too bullish considering historical performance. https://open.substack.com/pub/johanlunau/p/laurent-perrier-lpe?r=u2hy6&utm_campaign=post&utm_medium=web. Curious about your thoughts on this!
Nice article! A crital note though. Historical profitability has been a lot lower than the recent good years. Wine production historically has not been a business with good returns. That being said it is an interesting company. If they really can keep increasing margins and volume the current price is a steal.
You're correct about the recent positive developments in profitability. It's justified to question the sustainability and potential for further improvement in profitability. I attribute this success to the effective implementation of the premiumization strategy. The gradual increase in gross margin since 2009, coupled with increased sales (driven by better price/mix rather than volume growth) and operating leverage, have significantly improved the operating margin. But it's for sure something to look out for going forward.
I will have to do more in-depth research to get comfortable that profits are indeed sustainable. I do like the premiumization strategy very much. Growing wine production is a capital-intensive activity with low returns on capital. Given the limits on Champagne production and their strategy, this risk is mitigated.
China exposure?
Is not specifically disclosed but China exposure is very small. China is a very small Champagne market in general. Iirc only 2.2 million bottles were exported to China in 2022 in total (all brands). That's compared to 34 million bottles for US and 28 million bottles for UK - the two largest export markets. I think China is not even in the Top 10 export markets without Hong Kong and Taiwan.