RCO: Earnings Recovery Will Follow Normalization In Premium Demand

The analyst fair value estimate for Rémy Cointreau has been reduced from approximately EUR 75.20 to about EUR 64.98. Analysts are factoring in weaker cognac demand, slightly higher discount rates, and more cautious profitability assumptions, even as growth expectations have become somewhat firmer.

Analyst Commentary

Recent Street research highlights a wide dispersion in views on Rémy Cointreau, with some bullish analysts still pointing to medium term upside despite near term pressure on earnings and sentiment. The range of revised price targets, from the low EUR 30s to the mid EUR 50s, underscores differing assumptions around the pace of recovery in cognac demand and the company ability to protect margins.

While several houses have moved targets lower in response to ongoing weakness in key markets, the maintenance of positive ratings by some and the presence of higher price objectives relative to current trading levels suggest investors continue to see scope for value creation if execution improves and end demand normalizes.

Goldman Sachs, in particular, has shifted to a more cautious stance, citing persistent softness in the U.S. and China and limited visibility on a rebound. However, even this more neutral positioning still embeds an expectation that earnings will stabilize and gradually recover as channel inventories are worked down and pricing discipline is maintained.

Overall, the commentary indicates that the market remains focused on three variables for the stock investment case: the timing of a volume recovery in premium cognac, the resilience of pricing and mix, and the company ability to manage costs through the downcycle without eroding brand equity.

Bullish Takeaways

• Bullish analysts continue to see upside to the current share price, with some targets still anchored around the mid EUR 50s, implying material re rating potential if demand trends stabilize.
• Despite cuts, positive ratings maintained by bullish analysts signal confidence that Rémy Cointreau can protect premium pricing and margin structure, supporting a recovery in earnings power over the medium term.
• Higher end targets assume that current weakness in the U.S. and China is cyclical rather than structural, with brand strength and disciplined inventory management positioning the group to benefit from a rebound in high end spirits consumption.
• For valuation, bullish scenarios reflect scope for multiple expansion once visibility on top line growth improves, underpinned by the company track record in brand building and cost control through previous cycles.

What's in the News

• Rémy Cointreau revised its 2025-26 guidance, cutting expected organic sales growth from mid single digits to a range between stable and low single digits, reflecting deteriorating conditions in China and a weaker than expected rebound in the United States (Key Developments).
• The group now forecasts an organic decline in current operating profit of between low double digits and mid teens for 2025-26, versus a previously expected mid single digit decline, signaling a more prolonged earnings downturn (Key Developments).
• Management confirmed that, despite the weaker outlook, it will maintain sustained investment in China and the United States to support recovery, prioritizing long term brand equity over near term margin preservation (Key Developments).
• Rémy Cointreau reiterated expectations of adverse currency effects in 2025-26, guiding for a negative impact of between €50 million and €60 million on sales and between €25 million and €30 million on current operating profit (Key Developments).

Valuation Changes

• The fair value estimate has fallen notably, from about €75.20 to roughly €64.98 per share, reflecting a more cautious profitability outlook.
• The discount rate has risen slightly, from 5.98 percent to about 6.18 percent, modestly increasing the cost of capital applied in the valuation.
• Revenue growth has been revised higher, from approximately 6.1 percent to about 8.2 percent, indicating firmer expectations for top line expansion.
• The net profit margin has edged lower, from around 16.9 percent to roughly 15.7 percent, pointing to some pressure on medium term profitability.
• The future P/E multiple has been trimmed slightly, from about 23.0x to roughly 22.0x, incorporating a more conservative view on valuation despite anticipated earnings recovery.