Translation: Original published in Finnish on 04/10/2025 at 08:27 am EEST

We expect Anora's earnings to improve gradually in the coming years, but its return on capital and growth outlook are sluggish. We reiterate our Accumulate recommendation and raise our target price to EUR 3.5 (previously 3.3) supported by the value of the DCF model.

Leading producer and distributor of wines and spirits in the Nordic countries

Anora was born in September 2021 from the Finnish Altia and Norwegian Arcus, who both were producers, importers and distributors of spirits and wines. In June 2022, Anora acquired the leading Danish wine company Globus Wine. Anora is the largest player in the Nordic market for both wines and spirits. The company has both own brands and partner brands that it distributes. The company has strong expertise and a good market share in the alcohol monopoly chains in Finland, Sweden and Norway.

We find the targets challenging

The market for alcoholic beverages in the Nordic countries has historically been very stable. Anora’s goal is to grow faster than the market in the monopoly markets and faster in the international markets with its top brands. However, current market forecasts expect practically zero growth in the Nordics, and with an already strong market position, we see it as difficult to win significant market share in monopoly markets, and there are no clear signs of accelerating international growth. We therefore feel that the organic growth outlook for the company is modest. The company is aiming for 3-5% revenue growth, most of which is organic. We consider this a challenging goal and do not expect Anora to achieve it organically. In terms of profitability, the company targets an adjusted EBITDA margin of around 16 % in 2030. Even though the target is far away, the level is very high, as even in the exceptionally good COVID years, the company did not quite reach the target level. We believe the sustainable margin is around 10-11%. The company changed its CEO a month ago, when Kirsi Puntila, who previously headed the Spirits segment, took over as CEO of the entire Group, replacing Jacek Pastuszka, who had been in charge of the company for only 1.5 years. We believe the company will evaluate its strategy and targets this year following the change in management.

Earnings improvement expected but value creation is difficult

Anora's guidance for this year is an adjusted EBITDA of 70-75 MEUR. Anora expects market volumes to remain relatively unchanged, but assumes it will win market shares. We see Anora’s assumptions as somewhat optimistic. At the beginning of the year, market volumes have continued to decline. We also note that Anora has had to lower its guidance in the last two years as market developments have surprised negatively, and we see a cut in guidance as a risk for this year as well. Our adjusted EBITDA estimate is at the bottom end of the guidance at 70 MEUR. We made no forecast revisions on an annual level in this report but lowered our Q1 estimates slightly. While we believe Anora can improve its profitability in the coming years we don't see it reaching a significantly higher earnings level than currently. This is partly due to the sluggish growth outlook for the alcohol market (and the risk of further market decline) and, in our view, the company's limited ability to significantly reduce its costs. We expect that Anora's returns on capital will remain at approximately the level of our required return in the coming years, so we do not expect the company to create value.

Cash flow and dividend provide a sufficient expected return

Anora’s 2025 P/E ~11x is in line with our acceptable multiples. Anora's expected return at the current valuation is higher than our required return, supported by dividend and earnings growth. Dividend plays a significant role and it alone reaches close to our required return. However, a modest growth profile and return on capital weaken the risk/reward ratio. Our DCF model indicates a value of EUR 3.6 per share.