New Wine Products And Supermarket Entry Will Drive Future Success In Nordic Region

Key Takeaways

• Expansion in the Nordics and strategic new product introductions could drive revenue growth despite a shrinking market.
  
• Focus on decentralized models and potential M&A activities could enhance adaptability, efficiency, and profitability.
  
• Over-reliance on Nordic markets and regulatory constraints may limit growth opportunities, while declining eCom revenue signals potential vulnerability despite improved EBITA margins.

Catalysts

Develops, markets, imports, and sells wines.

• Continued market share growth in the Nordics, especially in Sweden and Finland, indicates potential for revenue growth as Viva Wine Group expands its dominance in a shrinking overall market.
  
• Introduction of new wine products and entry into supermarkets with wines up to 8% alcohol content can drive increases in volume and revenue in the Nordic region.
  
• The ongoing focus on decentralized and consumer-centric business models in the Nordics can result in better adaptability to consumer demand, potentially enhancing revenue and net margins through efficient market responses.
  
• Potential M&A activities aimed at strengthening the business could contribute to revenue growth and profitability by expanding market presence and operational synergies.
  
• Efforts to optimize logistics and CRM models within the eCom segment could, in the longer term, lead to improved operational efficiency and potentially enhance net margins and profitability once market conditions stabilize.

Viva Wine Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Viva Wine Group's revenue will grow by 5.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.9% today to 6.2% in 3 years time.
• Analysts expect earnings to reach SEK 298.4 million (and earnings per share of SEK 3.36) by about January 2028, up from SEK 118.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.2x on those 2028 earnings, down from 28.3x today. This future PE is lower than the current PE for the SE Beverage industry at 22.9x.
• 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 4.5%, as per the Simply Wall St company report.

Viva Wine Group Future Earnings Per Share Growth

Risks

• The eCom segment experienced a negative growth of 6% due to weaker consumer sentiment, particularly in Germany, indicating potential challenges in maintaining or growing revenues in this segment.
  
• There is a reliance on the mature Nordic markets for growth, and questions about whether further market share can be gained may imply a ceiling on revenue expansion potential.
  
• The company's strong market position in Sweden means there may be limited opportunities for further acquisitions, which could constrain growth avenues and impact future revenue streams.
  
• The dependence on the Nordic monopoly markets means any regulatory changes or market contractions could significantly impact revenue and profitability.
  
• Despite improving EBITA margins, the decline in adjusted EBITA in the eCom segment points to vulnerability in earnings if revenue challenges persist.

Valuation

• The analysts have a consensus price target of SEK51.0 for Viva Wine Group based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK4.8 billion, earnings will come to SEK298.4 million, and it would be trading on a PE ratio of 17.2x, assuming you use a discount rate of 4.5%.
  
• Given the current share price of SEK37.6, the analyst's price target of SEK51.0 is 26.3% 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.