Emperador - UOB Kay Hian 2023-11-22: Stable 3Q23 Results Despite Falling Margins

• Emperador Inc. (SGX:EMI) reported stable 3Q23 results with higher y-o-y revenue (+9.5% y-o-y) and PATMI (+5.4% y-o-y), driven by both the brandy and Scotch whisky segments. However, increased promotional activities and higher interest costs continue to pressure overall margins.
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Stable 3Q23 results, in line with expectations.

• See Emperador's announcement dated 13 Nov 2023. For 9M23, Emperador reported higher overall revenue (+10.4% y-o-y) but lower headline PATMI (-5.6% y-o-y), forming 70.9% and 74.4% of our full-year forecasts respectively. Excluding a PHP408m one-off gain in 2Q22, 9M23 underlying PATMI would have been stable y-o-y (+0.1% y-o-y).
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• Despite 3Q23 gross margins expanding 6.2ppt y-o-y, higher operating costs such as selling and distribution expenses (+68.0% y-o-y) and increased interest expense (+48.5% y-o-y) dragged EBITDA (+1.3ppt y-o-y) and PATMI (-0.5ppt y-o-y) margins respectively.
• Moving into 4Q23, we expect elevated opex from increased business activity and promotions to weigh on Emperador's overall margins, offset by higher revenue from a seasonally stronger quarter.

Brandy: Outperformance as margins stabilise.

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Llelleythan Tan UOB Kay Hian Research | https://research.uobkayhian.com/ 2023-11-22 SGinvestors.io

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