Premium Tequila And American Whiskey Will Drive Future Digital Success

Key Takeaways

• Becle's focus on premiumization and higher-quality brands supports revenue growth aligned with consumer trade-up behavior.
  
• Strengthening digital and e-commerce capabilities aims to capture younger consumers, boosting revenue and expanding margins through efficiency.
  
• Increasing tariff pressures and geopolitical uncertainties could negatively impact profitability and revenue, while exchange fluctuations pose further risks to financial stability.

Catalysts

Manufactures and distributes spirits and other distilled beverages in Mexico, the United States, Canada, and internationally.

• Becle's premiumization strategy, particularly in the Tequila and American whiskey categories, aligns with consumer trade-up behavior, supporting continued revenue growth as consumers shift toward higher-quality brands.
  
• Ongoing innovation and enhancement of digital and e-commerce capabilities aim to capture the evolving preferences of younger, convenience-driven consumers, potentially boosting future revenue and expanding margins through increased digital sales efficiency.
  
• Strategic investments in system infrastructure and organizational capabilities are expected to yield long-term benefits, improving operational efficiencies and potentially enhancing EBITDA margins and cash flow conversion.
  
• The easing of U.S. tariff uncertainties on Mexico-compliant goods, including Tequila exports, reduces potential cost pressures, supporting stable or increased net margins due to cost savings on exports.
  
• Favorable agave prices and geographic mix, coupled with mix optimization towards higher-value brands, are expected to maintain or improve gross margins, contributing to potential improvement in overall profit margins and enhancing net earnings.

Becle. de Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Becle. de's revenue will grow by 6.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.0% today to 14.3% in 3 years time.
• Analysts expect earnings to reach MX$7.7 billion (and earnings per share of MX$2.14) by about May 2028, up from MX$4.0 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting MX$8.5 billion in earnings, and the most bearish expecting MX$6.3 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.1x on those 2028 earnings, down from 20.2x today. This future PE is greater than the current PE for the MX Beverage industry at 18.7x.
• 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 13.72%, as per the Simply Wall St company report.

Becle. de Future Earnings Per Share Growth

Risks

• Increasing tariff pressures on imports could negatively impact profitability, leading to higher costs and decreased net margins, particularly in the U.S. market.
  
• The contraction in the Mexican spirits market due to economic uncertainty and cautious consumer spending could continue to negatively affect revenue growth.
  
• Declines in shipments and persistent discounting in certain regions may challenge revenue growth, impacting overall financial performance and margins.
  
• Geopolitical issues in Eastern Europe and the Middle East, along with persistent geopolitical uncertainty, could continue to affect revenue from those regions negatively.
  
• The impact of foreign exchange fluctuations, particularly the depreciation of the Mexican peso, could pressure costs and margins, affecting earnings and financial stability.

Valuation

• The analysts have a consensus price target of MX$27.761 for Becle. de 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 MX$37.0, and the most bearish reporting a price target of just MX$19.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be MX$53.6 billion, earnings will come to MX$7.7 billion, and it would be trading on a PE ratio of 19.1x, assuming you use a discount rate of 13.7%.
  
• Given the current share price of MX$22.26, the analyst price target of MX$27.76 is 19.8% higher.
  
• 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.