Westrock Coffee's High Growth Profile Warrants Premium Valuation: Analyst

Benchmark analyst Todd M. Brooks reiterated a Buy rating on the shares of Westrock Coffee Co WEST with a $15.00 price target.
In the Q3 release, the analyst highlighted two strategic actions that the company is undertaking to further accelerate the company’s growth profile, including the decision to accelerate the provisioning of Phase 2 of the new Conway FE&I facility and the acquisition of Kohana Coffee.
The analyst is impressed that Westrock is using the incremental ~$50 million in proceeds from the recent business combination with Riverview Acquisition to accelerate the CAPEX needed to provision Phase 2 of the Conway facility (~$100 million) to now open this phase by early FY25.
The analyst added that the acquisition of Kohana Coffee provides the company with an extract and ready-to drink focused production company based in California, which will give the company an enhanced FE&I production presence on the West Coast.
Westrock is planning to invest $3 million to $5 million in CAPEX over the next nine months to provision a specialty canning line at the Kohana facility that should allow it to triple the unit capacity of the facility.
With the acceleration of Phase 2 of the Conway facility being provisioned by the end of FY24, there is now visibility to an incremental ~$45 million of EBITDA being added to West’s earnings power annually between FY24 and FY27, noted the analyst.
The analyst believes the company’s superior and highly visible growth profile deserves a premium valuation to the peer group.
Price Action: WEST shares are trading lower by 1.21% at $13.90 on the last check Friday.

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