BSE: WINE
PURCARI WINERIES PLC
Romania
Claudia Balea
Bogdan Călăcean
Cristina Bivol
Marius Semeniuc
CONSOLIDATED BUSINESS
MODEL
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL
PERFORMANCE
UPSIDE POTENTIAL
MITIGATING RISKS
Wide geographicaldiversification
Outperforming team
Differentiating winemaking process
VITICULTURE
WINEMAKING
MARKETING
PROCESSING
STORAGELOGISTICS
BOTTLING
RETAILERSDISTRIBUTION
SALES E-COMMERCE
CONSOLIDATED BUSINESS MODEL
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
Leveraging an optimized value chainBUSINESS
4% of global grape
cultivation
Concours Mondial de Bruxelles
Challenge International du Vin Bordeaux
IWSC Decanter
50
26
23
1514
7
Increasing number of International prizes won
Source: Company data, team analysis
Europe
Romania, Republic of Moldova, Poland, Ukraine, Czech Republic,
Slovakia
Babeș-Bolyai University of Cluj-NapocaGeographical coverage
Europe
82%
Asia
7%
Others
11%
Asia
China, South Korea, Japan
Others
USA, Canada
WINE - Well-balanced, Intense, Natural, Exquisite
BUSINESS
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKSCONSOLIDATED BUSINESS MODEL
Geographical coverage
Europe
82%
WINE - Well-balanced, Intense, Natural, Exquisite
BUSINESS
Republic of Moldova 23% Sales
Romania 41% Sales
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKSCONSOLIDATED BUSINESS MODEL
Brand % of Sales
40%
29%
16%
15%
Eugen ComendantCOO
Founded the Group in 2002Over 35 years of experience in wine industry
Victor Bostan
CEO, Founder, Executive DirectorMonica Cadogan
Non Executive DirectorVictor Arapan
Executive Director
Vasile Tofan
Chairman of the board, Non Executive Director
Neil McGregor
Non Executive Director
86.1%
BoD structure
90%
Board skills and experience
100%
Conflicts of interests
0%
Protection of Shareholder Rights
100%
Committees
100%
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKSCONSOLIDATED BUSINESS MODEL
The company`s biggest assetBUSINESS
CONSOLIDATED BUSINESS
MODEL
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL
PERFORMANCE
UPSIDE POTENTIAL
MITIGATING RISKS
International growthstrategyFocus on
premiumizationStrong competitive
position
Wide geographicaldiversification
Outperforming team
Differentiating winemaking process
Sustainable expected growth
4.60%
8.90%
3.70%3.20%
4.10%
Romania Poland Czech R. Slovakia China
Revenue growth by category, 2019-2023 CAGR
Wine Spirits Beer
200
300
400
2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F
Worldwide wine revenue (billion USD)
INDUSTRY
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKSCONSOLIDATED BUSINESS MODEL
Source: OIV, team analysis Source: Euromonitor, team analysis
Leader in terms of profitability and growth
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
Recaș
Cotnari
Jidvei
Purcari Group
Vincon Vrancea
Zarea SA
Mk. Share in Romania, 2018
Other SMEs and hobbyists
Vincon
Vrancea
Jidvei
Purcari
Group Recaș
Zarea SA
Cotnari
0%
5%
10%
15%
20%
25%
30%
0% 10% 20% 30% 40%
Pro
fit
marg
in in
20
18
Sales CAGR,'15-'18
INDUSTRY
CONSOLIDATED BUSINESS MODEL
24.8%
Source: Ministry of Finance, team analysis
Direct competitors in Romania by 2018 sales
Source: Ministry of Finance, team analysis
67%
14%
7%
12%
Beer
Spirits
Don’t consume alcoholic
beverages
Wine
Alcoholic
beverages
preferences
Number of
respondents
841
36%
49%
14%1%
Price
category
<RON 30
RON [30;60]
RON (60;120]
>RON 120
259
223
220
185
145
132
98
94
74
22
OTHER
CRAMELE RECAS
PURCARI
JIDVEI
COTNARI
CRICOVA
CRAMA CEPTURA
MURFATLAR
CHÂTEAU VARTELY
BOSTAVAN
Romania - Which wine do you consume more often?
109
75
74
57
46
39
37
33
28
PURCARI
CRICOVA
OTHERS
CHÂTEAU VARTELY
BOSTAVAN
FAUTOR
APRIORI
TIMBRUS
GITANA
Moldova - Which wine do you consume more often?
Survey results - Established consumer baseSURVEY
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKSCONSOLIDATED BUSINESS MODEL
CONSOLIDATED BUSINESS
MODEL
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL
PERFORMANCE
UPSIDE POTENTIAL
MITIGATING RISKS
Wide geographicaldiversification
Outperforming team
Differentiating winemaking process
International growthstrategyFocus on
premiumizationStrong competitive
position
Long-run profitability
Strict cost management
Healthy growth strategy
Delivering on the promise
Strong EBITDA growth2016-2019
Double digit revenuegrowth2016-2019
Skyrocketing Net Profit2016-2019
Pillars supporting future profitability
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
FINANCIALS
CONSOLIDATED BUSINESS MODEL
Debt to Equity
4.0
26.5%
0.6
27.8%
Key Financial Ratios
Earnings per share (RON/sh)2.0
31.8%
0.6
29.7%
FY 2024FFY 2019A
Operating margin
Return on Equity
Long-run profitability
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
FINANCIALS
FORECASTED REVENUES INCREASE 2019A-2024F
14.6% CAGR
FORECASTED OPERATING PROFIT INCREASE 2019A-2024F
1310 bps
0%
10%
20%
30%
40%
50%
60%
-
50
100
150
200
250
300
350
400
450
2016A 2017A 2018A 2019A 2020F 2021F 2022F 2023F 2024F
Mill
ion
s
Revenue (LHS) Revenue Growth YoY (RHS)
CONSOLIDATED BUSINESS MODEL
Source: Company data, team analysis
Healthy growth strategy
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
FINANCIALS
FORECASTED REVENUES INCREASE 2019A-2024F
14.6% CAGR
FORECASTED EPS INCREASE 2019A-2024F
14.9% CAGR
0%
5%
10%
15%
20%
25%
30%
35%
0
1
2
3
4
5
2019A 2020F 2021F 2022F 2023F 2024F
Basic and diluted EPS (RON/sh) (LHS) EPS growth YoY (RHS)
CONSOLIDATED BUSINESS MODEL
Source: Company data, team analysis
Debt to Equity
4.0
26.5%
0.6
27.8%
Key Financial Ratios
Earnings per share (RON/sh)2.0
31.8%
0.6
29.7%
FY 2024FFY 2019A
Operating margin
Return on Equity
Long-run profitability
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
FINANCIALS
FORECASTED REVENUES INCREASE 2019A-2024F
14.6% CAGR
FORECASTED ROE INCREASE 2019A-2024F
77 bps
20%
21%
22%
23%
24%
25%
26%
27%
0
50
100
150
200
250
300
350
400
2019A 2020F 2021F 2022F 2023F 2024F
Mill
ions
Total Equity (LHS) Return on Equity (RHS)
CONSOLIDATED BUSINESS MODEL
Source: Company data, team analysis
Debt to Equity
4.0
26.5%
0.6
27.8%
Key Financial Ratios
Earnings per share (RON/sh)2.0
31.8%
0.6
29.7%
FY 2024FFY 2019A
Operating margin
Return on Equity
CONSOLIDATED BUSINESS
MODEL
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL
PERFORMANCE
UPSIDE POTENTIAL
MITIGATING RISKS
Revenue growth
Favorable domestic perspectivesStrong brand recognition
Long-run profitability
Strict cost management
Healthy growth strategy
Wide geographicaldiversification
Outperforming team
Differentiating winemaking process
International growthstrategyFocus on
premiumizationStrong competitive
position
DCFRON 24.72/sh
Relative ValuationRON 26.39/sh
TARGET PRICERON 25.05/sh
27.8%UPSIDE
RON 19.6/shMarch 13, 2020
BUY
27.8% Upside potentialVALUATION
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKSCONSOLIDATED BUSINESS MODEL
20%80%
Equity value494.3
Terminal value494.9
Enterprise Value602.9
Net Debt108.5
12m TPRON
24.72/sh
Upside 26.1%
Cost of Debt 4.6%
Cost of Equity 12.5%
WACC 9.3%
Terminal Growth Rate 3.2%
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
DCF Yields positive upside TARGET PRICE: RON 24.72
DCF VALUATION
CONSOLIDATED BUSINESS MODEL
WINE trades at a discount to peers
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
PEERS VALUATIONTARGET PRICE:
RON 26.39
CONSOLIDATED BUSINESS MODEL
Source: Thomson Reuters, team analysis
9.32 9.48 10.52 11.45 11.90 13.08
16.21
46.45
AmbraSA
WINE VVTikves
ADSkopje
KtimaKostas
LazaridisSA
MasiAgricola
SpA
ItalianWine
BrandsSpA
AdviniSA
BodegasRiojanas
SA
P/E
Peer median: 12.49
2.99
6.297.77 8.33 8.42 9.05
16.67
22.12
26.56
VV TikvesAD Skopje
Ambra SA WINE ItalianWine
BrandsSpA
MasiAgricola
SpA
KtimaKostas
LazaridisSA
BodegasRiojanas
SA
Advini SA VrankenPommeryMonopole
SA
EV/EBITDA
Peer median: 8.74
Monte Carlo simulation and sensitivity analysisVALUATION
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
73.2%
probability of
a BUY
94.5%
probability of
a BUY
Peers Monte Carlo simulation
FCFF Monte Carlo simulation
Term
inal
gro
wth
rat
e
Weighted Average Cost of Capital
8.5% 8.8% 9.27% 9.8% 10.3%
4.0% 35.18 32.49 28.89 25.52 22.87
3.6% 32.19 29.88 26.74 23.78 21.41
3.16% 29.43 27.44 24.72 22.10 20.00
2.8% 27.48 25.70 23.25 20.88 18.96
2.0% 23.92 22.51 20.53 18.58 16.98
CONSOLIDATED BUSINESS MODEL
Target price: RON 24.72
Target price: RON 26.39
Sensitivity analysis
CONSOLIDATED BUSINESS
MODEL
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL
PERFORMANCE
UPSIDE POTENTIAL
MITIGATING RISKS
Competitive position
Reshaping sales mix
Long-run profitability
Strict cost management
Revenue growth
Favorable domestic perspectivesStrong brand recognition
Healthy growth strategy
Accretive acquisitions
Wide geographicaldiversification
Outperforming team
Differentiating winemaking process
International growthstrategyFocus on
premiumizationStrong competitive
position
1
2
4
5
2. Financing issues
1. Political risk
5. Natural risk
4. FX Risk
Babeș-Bolyai University of Cluj-NapocaNo high impact and high probability risk
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
RISKS
CONSOLIDATED BUSINESS MODEL
3
3. Competition Risk
6
6. Prolonged global
pandemic
Driver
Decreased sales
Mitigating factors
Developing online channels and e-commerce
Increased indoors consumption
Global pandemic spreading beyond boundaries
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
RISKS
CONSOLIDATED BUSINESS MODEL
Source: Bloomberg, team analysis
Global pandemic spreads more than
predicted
Feb ’20 vs Jan ’20
↑ 34% increase in online sales2020
2019
A cruise ship in Japan quarantined thousands
The WHO declared global health emergency
Other countries, including the US, confirmed cases
China reported its first death.
Chinese authorities treated dozens of cases of pneumonia unknown cause.
Online Sales Baseline
(transactions)
150%
100%
9 Dec 23 Dec 6 Jan 20 Jan 3 Feb 17 Feb 2 Mar
EUR/RON – Exchange rate
4.0
4.3
4.6
4.9
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Driver
RON depreciation Direct impact on net profit
Mitigating factors
Offsetting borrowings with cash collected
Balanced net profit margins
Forex headwinds weigh on Group`s earnings
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKSCONSOLIDATED BUSINESS MODEL
Source: National Bank of Romania, company data, team analysis -
10
20
30
40
50
2016A 2017A 2018A
Mill
ions
EUR/RON and MDL USD/RON and MDL
Net profitNet profit
Net profit
RISKS
Impact of 5% appreciation of USD and EUR against RON and MDL on Net Profit
Average growing season temperatures for different grapes varieties
Cool12.5 - 15°C
Intermediate15-17°C
Warm17 – 19.5°C
Hot19.5 - 22°C
Pinot Gris
Riesling
Pinot Noir
Chardonnay
Sauvignon Blanc
Tempranillo
Merlot
Malbec
Syrah
Table Grapes
Cabernet Sauvignon
Driver
Natural shifts in temperature frontiers
Unable to produce a variety of grapes
Mitigating factors
Geographic diversification of
production platforms
Adapting production and sales mix
Climate change is reshaping the wine-making world
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL PERFORMANCE
UPSIDE POTENTIAL MITIGATING RISKS
RISKS
CONSOLIDATED BUSINESS MODEL
Source: OIV, team analysis
Babeș-Bolyai University of Cluj-Napoca
Wine has been a part of our civilization for over 8000 years, and although society will not be driving cars in twenty or thirty years from now, we will assuredly be drinking wine”— Zachary Elfman“
CONSOLIDATED BUSINESS
MODEL
FAVORABLE MARKET POSITION
CONSISTENT FINANCIAL
PERFORMANCE
UPSIDE POTENTIAL
MITIGATING RISKS
Wide geographicaldiversification
Outperforming team
Differentiating winemaking process
International growthstrategyFocus on
premiumizationStrong competitive
position
Long-run profitability
Healthy growth strategy
Strict cost management
Revenue growth
Favorable domestic perspectivesStrong brand recognition
Competitive position
Reshaping sales mix
Accretive acquisitions
Target price25.05 RON/shBUY 27.8%
UPSIDE