Corby Spirit and Wine Limited. (TSX: CSW.A) is a Canadian manufacturer, marketer and importer of spirits and wines. Company owns or represent many of the 25 top-selling brands in the country and support its brands with innovative and award-winning marketing campaigns and events. Besides majorly sales in Canada, the company also exports its products in the United States, Europe, and other international markets.

Key highlights

• Sales Volumes: The company’s retail sales volumes have declined 1% and retail value grew 1%, as on period ended September 30, 2021. Retail sales volumes for the Canadian whisky category declined 2%, while retail value for the category declined 1% over the same comparable period. Despite covid restrictions and lockdowns company was able to maintain its volumes by doing campaigns and recurring events.

• Promoting & Marketing Strategy: As a part of its marketing strategy company has published online guide named ‘Holiday hosting guide 2021’ on December 8^th, 2021. With this online guide Corby has made its brands more popular among the customers and more dynamic which will help in growing sales numbers.

• Ongoing & Upcoming Demands: The company’s iconic Canadian brand portfolio provided a route for sustainable value creation, led by focus on international brands. The company’s flagship brand i.e., Corby has captured the customer attention hence, witnessed increase in the demand. Additionally, in the current fiscal year, the lifting of COVID-19 restrictions led to a strong Q1 recovery and customer demands continue to drive and improve the overall financials.
  

• Brand Management and Consumer Insights-led Innovations Strategy: The Company’s brand management is the foundation of Corby’s strategy by driving growth through volumes. It also maintains significant position in Canada, as well as its partnerships with its ultimate parent, the world’s second largest spirits company, PR that enables Corby to leverage both local and global expertise.
  

Risks associated with investment             

The Company operates mainly in the beverages segment, having its owned brands and operates internationally.  Hence any disruption in supply chain, demand disruption, export restrictions, and covid restrictions could adversely impact the company’s financials. 

Financial Overview of for the Period Ended September 2021 (In millions of CAD, except share and per share amounts)

Source: Company’s Filing 

• The revenue of the company has slightly declined to CAD 38.5 million in Q1FY2021 from CAD 43.4 million in Q1FY2020, due to covid impact and restrictions in exports and its shipments.

• The company has increased its marketing, sales, and administration expenses to CAD 13.6 million in Q1FY2021 from CAD 12.8 million in Q1FY2020, due to expansion of its Brand and events performance to make its products reach in overseas market.
• The EBIT of the company stood at CAD 9.7 million in Q1FY2021 which was low as compared to CAD 14.7 million in Q1FY2020, due to decrease in Revenue.
• The Net earnings of the company reported CAD 7.0 million in Q1FY2021 v/s CAD 10.8 million in Q1FY2020.

Stock recommendation

Despite Covid impact, company’s retail stores in most provinces have remained open throughout the pandemic. Additionally, company have exclusive brands that easily approaches customer base and will increase market opportunities for company’s business. Furthermore, the company is carrying a healthy dividend yield of 5.68% which is 3.4 times higher than the Canadian 10 Year Bond Yield. Therefore, based on the above rationale and relative valuation, we recommend a "Spec Buy" rating at the closing price of CAD 17.13 as on 07^th January 2022. 

Technical Summary Analysis

One-Year Price Chart (as on January 07, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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