On Monday, Citi reaffirmed its Buy rating on Remy Cointreau SA (RCOP:FP) (OTC: REMYY) with a steady price target of EUR135.00. The firm's analysis indicated that Remy Cointreau faced challenges during the fiscal year 2024, citing subdued US and China market depletions, inventory reductions, and the ongoing anti-dumping probe into China's Cognac imports as primary factors impacting the stock's performance.
Despite these hurdles, Citi anticipates a notable sequential improvement in the company's organic sales growth (OSG) for the fourth quarter of 2024, forecasting a decrease of 2.5%, compared to a 23.5% drop in the third quarter.
This expected recovery is attributed to the stabilization of the Chinese market, with no further destocking, and a rebound in the Europe, Middle East, and Africa (EMEA) region. Consequently, Remy Cointreau is projected to meet its fiscal year 2024 guidance, albeit at the lower end of the -15% to -20% range.
Looking forward, Citi suggests that the absence of additional negative factors in the fourth quarter of 2024 and anticipated effective cost management could provide near-term growth opportunities for the company.
The firm also highlighted the intrinsic value of Remy Cointreau's maturing inventory, estimated at approximately €150 per share, and the recent equity buy-back by the controlling family, amounting to about 1% year-to-date.
Citi's analysis concluded that, given the stock's current trading position near long-term relative lows, the 12-month risk/reward profile for Remy Cointreau is tilted favorably towards potential gains.
InvestingPro Insights
In light of Citi's optimistic outlook on Remy Cointreau SA (RCOP:FP) (OTC: REMYY), recent data from InvestingPro further enriches the analysis. The company's impressive gross profit margin stands at 71.31% for the last twelve months as of Q2 2024, demonstrating its ability to maintain profitability even in challenging market conditions. Additionally, Remy Cointreau's commitment to shareholder returns is evident with a dividend yield of 2.32% and a history of raising its dividend for 3 consecutive years, indicating a reliable income stream for investors.
While Remy Cointreau's market cap currently sits at $5.11 billion, the P/E ratio of 25.65 suggests that investors are paying a premium for earnings, which aligns with Citi's recognition of the company's intrinsic value. Moreover, with a fair value estimation of $14.09 by InvestingPro, the current price of $9.56 may present an opportunity for investors looking for potential upside. For those interested in deeper analysis, InvestingPro offers additional insights and metrics, including the company's ability to manage its moderate level of debt and maintain liquidity. To explore further, investors can utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to over 9 additional InvestingPro Tips for a comprehensive investment strategy.
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