Performance: Robust bottom-line growth

• GGBL’s revenue grew by 23.5% y/y to GHS 653.5m, as the company continued to drive sales through its activation campaigns
• Costs increased in line with revenue generation, rising by 23.3% y/y to GHS 473.5m
• Gross margin, however, increased marginally by 0.1pp to 27.5%
• With SG&A increasing by 31.0% y/y, operating margin decreased by 1.0pp to 9.8%
• GGBL also reported a 52.2% y/y decline in taxes
• Consequently, GGBL’s net profit increased by 65.7% y/y to GHS 45.3m, posting a net profit margin of 6.9% (+1.8pp)

Outlook: Short-to-medium term growth is anchored

• We expect the company’s relatively large brand portfolio, product innovation and investment in marketing campaigns to anchor GGBL’s short-to-medium term revenue growth
• With the addition of new international brands, such as Smirnoff Chocolate Vodka and Baileys delight, we expect GGBL’s margins to improve as these brands are high margin premium brands
• We expect the new sorghum processing brew house to drive the production of Guinness Foreign Extra Stout, Malta Guinness and Guinness Smooth, reduce the company’s reliance on imported cereals and drive down cost of sales
• We believe operating expenses will remain elevated in the coming quarters as management hinted of plans to continue to invest in activation campaigns for ready-to-drink products and Smirnoff brands.However, we expect operating margins to remain robust on the back of stronger sales

Valuation: Under Review 

• We are in the process of re-initiating coverage on GGBL and have therefore placed our recommendation under review
• GGBL is trading at a P/E of 12.2x and EV/EBITDA of 1.7x