Premium Wine Demand And MASPEX Synergies Will Support Strong Long Term Business Expansion

Catalysts

About Purcari Wineries

Purcari Wineries is a leading wine and spirits producer in Central and Eastern Europe, with a portfolio of premium brands sold across domestic and international markets.

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

• Acceleration of premium wine consumption in Central and Eastern Europe, together with Purcari’s strong brand equity in Romania, Moldova and Bulgaria, supports sustained double digit top line growth and improved pricing power, which should lift revenue and gross margin.
• Rising global demand for differentiated regional wines and new international distribution agreements position the group to scale exports from an already strong rest of world growth base, supporting long term revenue compounding and operating leverage in earnings.
• Ongoing vineyard expansion, irrigation rollout and improved harvest yields increase self sufficiency in quality grapes and reduce dependence on expensive bulk wine, which is likely to enhance gross margin and stabilize EBITDA margins over the next harvest cycles.
• MASPEX becoming the majority shareholder, once fully approved, should unlock access to a powerful commercial network in Poland and wider CEE, enabling distribution synergies that can drive higher volumes, better shelf visibility and ultimately higher revenues and earnings.
• Disciplined pricing strategy, mix improvement toward higher margin brands and active cost efficiencies in packaging, logistics and energy are expected to offset inflationary pressures and regulatory costs such as RetuRO, supporting resilient net margins and growing net profit.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Purcari Wineries's revenue will grow by 11.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.2% today to 23.0% in 3 years time.
• Analysts expect earnings to reach RON 133.3 million (and earnings per share of RON 3.4) by about December 2028, up from RON 51.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting RON158.4 million in earnings, and the most bearish expecting RON114.4 million.
• 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 10.4x on those 2028 earnings, down from 14.9x today. This future PE is lower than the current PE for the RO Beverage industry at 14.6x.
• Analysts expect the number of shares outstanding to grow by 0.54% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 17.52%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent cost inflation and regulatory burdens, such as higher RetuRO waste management charges in Romania and rising staff and logistics expenses, could outpace the company’s pricing power over time, compressing gross margin and net margin despite robust volume growth.
• Foreign exchange volatility in key currencies like the Moldovan leu, Romanian leu and Turkish lira has already created sizable non monetary losses and could remain a structural headwind, diluting reported net profit and increasing earnings volatility even if operational performance remains strong.
• Heavy dependence on Central and Eastern Europe markets, with Romania, Moldova and Bulgaria contributing the bulk of sales, exposes the business to regional economic slowdowns or weaker consumer spending. This could limit premiumization and slow revenue growth.
• Execution risk around higher leverage and expanding capital investment to fund vineyard growth and working capital may become more acute if interest rates rise again or cash generation disappoints. This could pressure free cash flow and ultimately constrain earnings growth.
• Integration and strategic alignment risks with new majority shareholder MASPEX, including potential delays in regulatory approvals and uncertainty over commercial plans in Poland and wider CEE, could postpone expected distribution synergies. This may lead to slower than anticipated revenue acceleration and operating leverage.

Valuation

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

• The analysts have a consensus price target of RON20.73 for Purcari Wineries 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 RON22.7, and the most bearish reporting a price target of just RON17.8.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be RON578.7 million, earnings will come to RON133.3 million, and it would be trading on a PE ratio of 10.4x, assuming you use a discount rate of 17.5%.
  
• Given the current share price of RON18.8, the analyst price target of RON20.73 is 9.3% 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.