HSBC: Rémy Cointreau ‘firing on all cylinders’

French drinks group Rémy Cointreau “continues to impress” and is “sailing into full-year 2018 with full tailwinds” following its strong FY17 results, HSBC Global Research has said.

The Cointreau liqueur and Rémy Martin maker saw reported profits soar by 26.7% for the year as sales climbed 4.2% to €1.09 billion (US$1.23bn).

Following the successful year, HSBC upped its discounted cash flow valuation by 16% to €116, indicating the company’s attractiveness to investors.

HSBC said the results showed Rémy Cointreau was “firing on all cylinders” in a way not seen for five years as Cognac recovered and the higher end of the company’s spirits portfolio flourished.

With a “solid” outlook across the footprint, HSBC says the company’s turn to consistent organic sales growth following the Cognac crisis is “complete”. However the analyst cautions Rémy will need to address its balance sheet strategy in the medium term to stop it moving toward inefficiency.

“The most obvious solutions to the balance sheet challenge is either to execute more M&A or perhaps a share buyback,” HSBC says.

“Either case will likely be positive as excess cash could be returned directly to investors or used to expand the portfolio. We like either scenario.”

Rémy Cointreau acquired France-based whisky producer Domaine des Hautes Glaces in November 2016, and America’s Westland Distillery in December 2016.