Emperador shares inch up on global expansion, Q1 income

May 22, 2023

EMPERADOR, Inc.’s shares went up last week as investor confidence picked up on the company’s commitment to global expansion and its double-digit revenue growth in the first quarter.

Data from the Philippine Stock Exchange (PSE) showed a total P314.08-million worth of 14.88 million shares were traded from May 15 to 19, making it the 19th most actively traded stock in the local market last week.

Shares of the Tan-led distillery rose by 1.7% week on week to P21.2 apiece on Friday from its P20.85 finish last May 12. For the year, the stock went up by 2.9%.

While the stock’s price inched up due to revenue growth and strong international demand, Globalinks Securities and Stocks, Inc. Head of Electronic Trading Mark Crismon V. Santarina said that Emperador’s stock remained “stagnant” last week amid investor caution and market uncertainties.

The economy has been showing signs of slower inflation after the 14-year peak of 8.7% in January, as consumer prices cooled to 6.6% in April. Core inflation also slowed to 7.9% in April from its 22-year high of 8% in March.

Last Thursday, the Bangko Sentral ng Pilipinas kept the benchmark interest rate at 6.25% after nine consecutive meetings of rate hikes that totaled a 425-basis-point increase since May 2022.

Despite data showing foreign investors had sold Emperador’s shares last week, the company’s global expansion, premium brands, and market diversification have given it a way to mitigate the impact of inflation and interest rates on earnings, Mr. Santarina said in a Viber message.

“Additionally, the company’s adaptability, operational efficiency, and strategic planning contribute to its resilience in navigating challenging economic conditions.”

The international spirits company announced on May 17 its allocation of P7 billion in capital expenditure (capex) to boost international expansion this year.

Emperador earmarked P6 billion of its capex for its whiskey segment and the upgrade of five facilities in Scotland. About P1 billion will be set aside for its brandy business facilities in the Philippines, Spain, and Mexico.

“We view expansion plans as generally positive in nature since this could eventually translate to better earnings prospects for the company,” China Bank Securities Corp. Research Associate Stephen Gabriel Y. Oliveros said in an e-mail.

“Specific to [Emperador], we think its focus to further grow the whiskey business is margin accretive in the long run considering the high margin of whisky compared to brandy. For context, the gross margin of whisky was at 46.3% in [first quarter 2023] versus Brandy at 24.8%,” he added.

Mr. Oliveros thinks Emperador’s expansion plans are likely to “bear better fruit in the longer term” as aged spirits take time for profits to show up while forming part of its goal to attain a 50-50 revenue split between local and international markets by 2025.

Amid market concerns about the high inflationary environment, Emperador released its quarterly figures last Friday showing a 26.4% year-on-year revenue growth to P15.59 billion from P12.33 billion a year ago.

First-quarter net profit grew by 10% to P2.34 billion from P2.13 billion a year earlier. Attributable net income also went up by 10.5% to P2.32 billion from P2.10 billion previously.

Globalinks’ Mr. Santarina gave his second-quarter income forecast for Emperador at approximately P3 billion, with his full-year income forecast at P11.7 billion.

Analysts said that the liquor products firm’s global expansion was strategic with its well-established brand reputation providing a solid foundation for growth.

“We think [Emperador’s] listing on SGX was generally geared to improve the stock’s liquidity and boost its global profile. While the listing typically would not have a direct impact on financial performance, we think that it helped with respect to building brand recognition with global consumers,” Mr. Oliveros said.

For the week, China Bank Securities’ Mr. Oliveros pegged Emperador’s support and resistance level at P20.65 and P21.40, respectively.

“When evaluating [Emperador’s] stock, it is crucial to monitor revenue growth, global expansion, and brand performance, while staying informed about economic conditions, financial reports, and industry trends,” Mr. Santarina said.

He placed Emperador’s support and resistance levels fat P20 and P23.30, respectively.

“It may be prudent to await favorable developments that could potentially trigger a breakout in the stock, considering the potential positive impact from an anticipated interest rate slowdown in the future,” he added.

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