Turnaround Program And Premiumisation Will Support Improving Margins Over The Coming Years

Catalysts

About Anora Group Oyj

Anora Group Oyj is a Nordic wine, spirits and industrial products company focused on branded beverages, contract manufacturing and value added industrial ethanol and starch solutions.

What are the underlying business or industry changes driving this perspective?

• Execution of the Fit, Fix and Focus turnaround program, including organizational simplification and efficiency initiatives, is expected to structurally lower operating expenses and raise the comparable EBITDA margin toward the EUR 70 million to EUR 75 million 2025 target range, supporting earnings growth.
• Ongoing premiumisation and innovation in core brands such as Koskenkorva, Blossa and key partner wines, including successful seasonal and ready to drink launches, should support mix improvement and price realization, lifting net sales and gross margin over time.
• Stabilisation of raw material and input costs, exemplified by materially lower barley prices, combined with disciplined revenue management, provides a more predictable cost base that can translate into sustained gross margin above 43% and improved net profit as volumes recover.
• Growing demand for more sustainable packaging and supply chain solutions, together with regulatory changes in markets like Denmark that favour eco friendly formats such as bag in box, should strengthen Anora’s competitive position in Nordic monopolies and underpin long term revenue resilience.
• Supply chain and logistics optimisation, including higher efficiency in the industrial segment and Vectura’s operations, alongside tighter credit control and reduced inventory levels, is expected to enhance cash conversion, lower net debt and reduce leverage, supporting equity value through stronger free cash flow.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Anora Group Oyj's revenue will remain fairly flat over the next 3 years.
• Analysts assume that profit margins will increase from 2.1% today to 4.2% in 3 years time.
• Analysts expect earnings to reach €28.5 million (and earnings per share of €0.42) by about December 2028, up from €14.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 10.8x on those 2028 earnings, down from 17.5x today. This future PE is lower than the current PE for the FI Beverage industry at 14.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.78%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Continued structural volume declines in Nordic monopoly channels, combined with exposure to partner and filler contracts that can be lost or repriced, could keep net sales under pressure and prevent a stable revenue base from supporting a flat share price through the cycle, weighing on revenue and earnings.
• If the Fit, Fix and Focus turnaround and ongoing efficiency projects, including the large scale ERP implementation, face execution setbacks or cost overruns, the expected margin gains may not materialise, putting downside risk on comparable EBITDA and net profit.
• Shifts in consumer preferences toward new beverage formats and intensifying competition across wider alcohol and ready to drink categories may outpace Anora’s innovation and brand building, eroding market share and mix benefits and ultimately compressing revenue and gross margin.
• Reliance on contract manufacturing and filler business in Denmark, alongside unresolved issues such as the Globus related insurance arbitration, could leave earnings more volatile than expected, with any adverse outcomes in volumes or claims negatively affecting operating profit and cash flow.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €3.87 for Anora Group Oyj based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €4.7, and the most bearish reporting a price target of just €3.4.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €673.0 million, earnings will come to €28.5 million, and it would be trading on a PE ratio of 10.8x, assuming you use a discount rate of 5.8%.
  
• Given the current share price of €3.63, the analyst price target of €3.87 is 6.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.