Truist Securities analyst Bill Chappell reiterated a Buy rating on the shares of MGP Ingredients, Inc. (NASDAQ:MGPI) with a price target of $125.
MGPI will report second-quarter FY23 results on Thursday, August 3.
The analyst believes this will be an important quarter for the company, not for the actual results/guidance but for the company’s transformative moves during the quarter.
The first of these was the acquisition of Penelope, a high-end whiskey brand that targets women.
The analyst sees the company to be uniquely portioned to buy brands like Penelope and generate meaningful synergies with its ability to manufacture and nationally market and distribute those brands.
The second move was the announced exit of third party manufacturing of vodka, gin and industrial alcohol by the end of 2023, which according to the analyst, were challenged businesses in which MGPI had little control of its success, increased competition, and deteriorating margins.
The above steps can help boost the company’s valuation in coming quarters, opined the analyst.
The analyst said as investors come to view MGPI as a spirits business, its multiple can move closer to the 20-25X forward EBITDA valuation of its large cap spirits peers versus the current 14.2x EV/EBITDA valuation it holds today.
Price Action: MGPI shares are trading higher by 0.03% at $113.92 on the last check Monday.
