Lifting Spirits Since 1990
EMI is the largest liquor producer in the Philippines and the world’s top brandy producer by volume, with a strong brand portfolio spanning various price points. After its acquisition of Whyte & Mackay in 2014, it has reaped synergies in procurement and operations while benefitting from the world’s booming alcohol market, especially in Asia. EMI has a planned dividend policy of at least 40% payout. Initiate coverage with a HOLD and a target price of S$0.53, based on 30x 2023F PE.
• Rich heritage and innovative portfolio across multiple price points. Emperador Inc’s (EMI) diversified brand portfolio includes well-recognised global brands spanning a broad range of price points for both its Scotch whisky and brandy segments. The portfolio encapsulates products that range from accessible to luxury and caters to all sorts of consumer preferences. The group also constantly innovates to address shifting consumer preferences, as evident in the recent launch of Emperador Double Light.
• Premiumisation of its offerings is a key competitive advantage. The strategic move was made in response to existing market trends whereby consumers are becoming increasingly well-versed in drinking and appreciating the value of premium liquor. Hence, they are willing to fork out a premium for better quality. This is evident in EMI’s premium single malt whiskies being priced 10-15x higher than accessible Scotch whisky brands.
• Well-positioned to capitalise on growth opportunities in China. EMI’s offerings are well received in Europe and have seen early success in its expansion into the Middle East and China. In China, EMI has seen robust growth as the company grabs more market share. EMI has credited its success to its Asian identity which would allow for better future market penetration in Asia.
• Internationalisation in high-growth markets delivers better margins. EMI targets to have 50% of its sales coming from outside of the Philippines by 2025. Currently, the company has a huge following in high-growth markets such as China and the Middle East. Its premuimisation strategy has allowed EMI to enjoy higher margins as compared with most of its peers in the industry. For instance, EMI was able to achieve a net margin of 17.8% in 2021 vs 20.9%, 14.8%, 10.5% and 3.6% for its closest competitors Diageo, Pernod Ricard, Ginebra San Miguel Inc and Cosco Capital Inc respectively.
• Initiate coverage with HOLD and a PE-based target price of S$0.53, based on 30x 2023F PE, pegged to peer average. The stock is trading at 27.5x 2023F PE, in line with peers’ 2023 average PE.
