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Chapel Down (LSE: CDGP) is England’s main winemaker, with vineyards throughout the attractive Kent countryside. It’s the one English wine firm with a inventory market itemizing, which makes this a novel penny inventory.
Since itemizing on the finish of 2023, Chapel Down has misplaced round 1 / 4 of its market worth. Nevertheless, it’s up 34% from a February low and now sits at 43p.
After posting a loss final 12 months, the glowing wine specialist mentioned it expects to generate robust gross sales this 12 months and return to full profitability.
Long term, it intends to not solely dominate the English winemaking scene, but additionally export its bubbly globally, particularly to America.
Evidently, if it turns into an exporting powerhouse, its market cap of £75m might at some point froth as much as a a lot larger determine. Certainly, it’d even develop into a millionaire-making penny inventory, relying on how a lot one invested.
So, ought to I snap up some shares for my ISA, simply in case? Right here’s my take.
Our terroir shares lots of the traits which have made Champagne so profitable as a wine area.
Chapel Down Chair Martin Glenn
2024 outcomes
Chapel Down has a 16% share of the English wine market. On the finish of 2024, it had 1,024 planted acres of vineyards, round 10% of the UK’s whole.
Final 12 months, e-commerce (+22%) and on-trade (+16%) channels did nicely, however off-trade was weaker, as supermarkets and wine retailers decreased their inventory ranges. Stripping out its now-closed spirits enterprise, income dropped 3% to £16.35m.
This resulted in a small £1.3m loss. As talked about although, the agency expects to return to profitability this 12 months, then construct earnings over the medium time period.
Challenges
Now, there are a couple of dangers to pay attention to right here. One is that inflation is creeping again up, which might heap extra strain on shopper spending.
The fourth quarter is an important buying and selling interval for Chapel Down, as households refill on wine. So a weak festive interval would probably throw the complete 12 months’s outcomes off-kilter.
Additionally, dangerous climate might lead to difficult rising circumstances and a decrease harvest yield. After all, this could work each methods, as there was an distinctive harvest in 2023.
And whereas international warming ought to profit English wine-growers long run, it might additionally throw up extra excessive climate patterns.
Lastly, web debt stood at £9.16m on the finish of 2024. That was up considerably 12 months on 12 months, and is price monitoring shifting ahead.
My transfer
Chapel Down has signed a brand new settlement with Jackson Household Wines (a big drinks retailer) for the distribution of its glowing wines within the US. Tens of millions with English ancestry throughout the pond might take a particular curiosity, which may very well be an enormous development driver.
By 2035, the agency goals to win the equal of 1% of the 300m bottle international Champagne market. For context, it bought round 1.5m bottles of wine final 12 months.
For the inventory to actually be an enormous winner, the corporate will in all probability must exceed this goal. However that’s removed from assured at this level.
Weighing issues up, the inventory is a bit too dangerous for me, so it received’t be making me a millionaire.
After all, that doesn’t imply it will probably’t nonetheless do nicely. Adventurous buyers may wish to take into account this penny inventory at 43p.
