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Chapel Down Group (LSE:CDGP) is a penny inventory listed on the London Inventory Change. As with all penny inventory, the funding dangers are heightened. These are small firms that provide high-growth alternatives, however with loads of dangers hooked up. They are often unstable, however buying and selling quantity is often low.
Personally, I believe this firm has constructed such a robust model that it shouldn’t fail. Served at royal weddings and because the sponsor of the Boat Race, it has cemented itself as a family identify amongst its socio-economic goal market. There are not any ensures, after all, however let’s take a more in-depth look.
A rising enterprise
Benefitting from local weather change, which permits Chardonnay and Pinot Noir grapes to thrive in English vineyards, Chapel Down has emerged as the most important UK producer. It holds roughly 10% of the UK’s whole planted winery acreage with 1,024 acres.
Internet gross sales revenues totalled £16.4m in 2024. That’s down 5% on the yr earlier than, however fourth-quarter gross sales have been up 7% yr on yr. The truth is, excluding the now-exited spirits enterprise, fourth-quarter revenues would have been 10% increased than final yr. In accordance with administration, this constructive momentum is claimed to have carried into the brand new yr.
Wanting ahead, the forecasts offered by analysts counsel that income may attain £19m in 2025 and £22m in 2026. This could mirror robust double-digit earnings development. It is a core signal of the energy of the model and well being of the enterprise.
The climate performs a job
Unsurprisingly, climate nonetheless performs a large position in wine manufacturing. The 2024 harvest at Chapel Down was considerably smaller than the earlier yr, with roughly 1,875 tonnes produced, in comparison with 3,811 tonnes within the “distinctive” 2023 harvest. Fortunately, what we’ve had already in 2025 could possibly be pretty conducive to harvest this yr.
That was one factor that weighed on the share value. One other is that plans to place the corporate up on the market have been deserted, inserting downward stress on the inventory. That is nonetheless very a lot a enterprise within the development part. And a few traders had been holding on till a bigger enterprise purchased the corporate, hopefully for a good-looking premium. And with a market cap of £66m, it’s actually not a giant enterprise.
Nonetheless, the present house owners are taking the agency ahead themselves. The corporate’s enlargement plans, together with the £32m Canterbury vineyard enlargement, purpose to extend manufacturing capability to 9m bottles yearly by 2032, up from 1.5m in 2021. It is a important funding, which can see internet debt develop from round £9m to round £14.6m by 2026.
However this might ship the economies of scale that Chapel Down must be profitable and develop into its valuation.
The underside line
It’s a inventory I’ve been focused on. That’s partially as a result of shareholders with 2,000+ shares obtain a 33% low cost on full-priced wines bought immediately from Chapel Down. Furthermore, noting round £33m in internet property, there’s proof it may begin to look undervalued within the close to future if its gross sales development is sustained — which I believe it is going to be.
One concern, nevertheless, is the buying and selling quantity. It’s not likely on many traders’ radar and it might take some time for excellent news to be recognised throughout the inventory value. Personally, I’m simply preserving an in depth eye on this one for now.
