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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