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Chapel Down Group (LSE:CDGP) is a penny inventory listed on the London Inventory Trade. As with every penny inventory, the funding dangers are heightened. These are small firms that supply high-growth alternatives, however with loads of dangers hooked up. They are often unstable, however buying and selling quantity is often low.
Personally, I believe this firm has constructed such a powerful model that it shouldn’t fail. Served at royal weddings and because the sponsor of the Boat Race, it has cemented itself as a family title amongst its socio-economic goal market. There are not any ensures, in fact, however let’s take a better look.
A rising enterprise
Benefitting from local weather change, which permits Chardonnay and Pinot Noir grapes to thrive in English vineyards, Chapel Down has emerged as the most important UK producer. It holds roughly 10% of the UK’s whole planted winery acreage with 1,024 acres.
Internet gross sales revenues totalled £16.4m in 2024. That’s down 5% on the yr earlier than, however fourth-quarter gross sales have been up 7% yr on yr. Actually, excluding the now-exited spirits enterprise, fourth-quarter revenues would have been 10% greater than final yr. In response to administration, this constructive momentum is alleged to have carried into the brand new yr.
Wanting ahead, the forecasts supplied by analysts counsel that income might attain £19m in 2025 and £22m in 2026. This may mirror sturdy double-digit earnings development. This can be a core signal of the power of the model and well being of the enterprise.
The climate performs a task
Unsurprisingly, climate nonetheless performs an enormous function in wine manufacturing. The 2024 harvest at Chapel Down was considerably smaller than the earlier yr, with roughly 1,875 tonnes produced, in comparison with 3,811 tonnes within the “distinctive” 2023 harvest. Fortunately, what we’ve had already in 2025 could possibly be pretty conducive to an excellent harvest this yr.
That was one factor that weighed on the share value. One other is that plans to place the corporate up on the market have been deserted, putting downward strain on the inventory. That is nonetheless very a lot a enterprise within the development section. And a few buyers had been holding on till a bigger enterprise purchased the corporate, hopefully for a good-looking premium. And with a market cap of £66m, it’s actually not an enormous enterprise.
Nonetheless, the present house owners are taking the agency ahead themselves. The corporate’s enlargement plans, together with the £32m Canterbury vineyard enlargement, intention to extend manufacturing capability to 9m bottles yearly by 2032, up from 1.5m in 2021. This can be a vital funding, which is able to see web debt develop from round £9m to round £14.6m by 2026.
However this might ship the economies of scale that Chapel Down must be profitable and develop into its valuation.
The underside line
It’s a inventory I’ve been all for. That’s partially as a result of shareholders with 2,000+ shares obtain a 33% low cost on full-priced wines bought instantly from Chapel Down. Furthermore, noting round £33m in web belongings, there’s proof it might begin to look undervalued within the close to future if its gross sales development is sustained — which I believe it will likely be.
One concern, nevertheless, is the buying and selling quantity. It’s not likely on many buyers’ radar and it could take some time for excellent news to be recognised inside the inventory value. Personally, I’m simply preserving an in depth eye on this one for now.
