Diageo plc

Analyst thesis

Our recommendation is based on:

• The portfolio includes some of the world's most recognised spirits brands, alongside Guinness as a leading beer brand. Together with its premium positioning and premiumisation as a growth driver going forward, this further strengthens Diageo’s (DGE) brand moat.

• High, stable profit margins reflect DGE’s premium positioning, although recent declines have been driven by tariffs, higher input costs, and marketing expenditure. Tariff pressures have eased, commodity pricing is being addressed through pricing and cost savings, and marketing expenditure is being reduced and more tightly targeted to improve efficiency and support demand, as seen in the recent results.

• DGE trades at a 25.0% discount to its five-year average NTM P:E. Considering the quality of the portfolio of brands and current margins, along with stronger performance from regions outside the US and China expected to offset weaker performance in these two markets, DGE is attractively priced.