德银澳大利亚食品与饮料行业胜利方式的扩展201921625页

16February2019Food&Beveragea2MilkandSynlaitFood&BeverageForecastChangeAustralasiaAustraliaNewZealandIndustrya2MilkandSynlaitDate16February2019DeutscheBankResearchExtendingthewinningformulaExecutingwell-reiterateBuyonbothATM/SMLInthisreport,weuseanalysisofrecentindustrydatapointsalongwithourownonlinedatacapturetocalibrateour1H19ATMresultexpectation(20thFeb).Wehavealsotakentheopportunitytoreviewourmedium-termgrowthprospectsforATMfollowinggreaterChinaregulatorycertainty(lateCY18)andtoincludealargerUSopportunityviaadultnutrition.NotwithstandingthestrongpriceperformancesCYTDofATM+14%andSML+7%(NZX50G+5%),wereiterateourBuyratingsonbothstocks.ForATM,ourconfidenceisunderpinnedbystrongChinaInfantperformanceandouradditionalvaluationsupportcomingfromalargerUSopportunityset.SMLrationaleislinkedtoourconfidenceinATM’sinfantformulaprospects,withthecompanystilltoexecuteanymeaningfuldiversificationstrategywithitsotherIFCcustomersandcategories.StrongdaigoufinishtoATM1H19Weexpectrevenue+40%toNZ$609mnandEBITDA+40%toNZ$200mn,margin33%flatononpcp.ThisimpliesastrongNov/Decmonthlyrevenuerunrateof+39%toNZ$120mnonpcpandiscyclingastrongbase.It’salso+30%vs.theavg.Jul–Oct-18(4M19)run-rateofNZ$92mn.Asalways,akeyjudgementfactoristheInfantinventoryposition,whichcouldswingourIFrev.of+47%toNZ$500mnby+/-NZ$20mn.Otheritems:ANZfreshrev.+12%toNZ$95mnandUS/UKfreshrev.+57%toNZ$14mn(exUKIFofNZ$15mn,bothonpcp).Keyfuturehealthfactors:(1)Kantarshare,(2)Chinalabel%,and(3)USfreshupdateInouropinion,thecurrentpriceisnowwelluptospeedonChinaInfant(ourDCFest.c.NZ$10),thereforeinvestorswillbelookingforanunderpinviafurthergainsinKantarshare(DBe+0.2ppqoqto5.8%)andastrongliftinChinalabelsalesmix(DBe+3pphohto15%MAT)followingincreaseddistributionandwithSMAR.Toprovideadditionalvaluationsupport,wenowneedtoseeincreasedconfidenceontheUSgrowthoption,specificallyfurtherfreshdistributionpoints(1Q19was9k),sellthroughKPIs(?)and/orfutureleverageoptionsviaanAdultNutritionproductset(similartoFreedomFoodsportfolio)?.Wemaybeoverlyhopefulonthelatterpointswhichmaybesavedfortheinauguralinvestorday.InourrevisedgroupspotDCFvaluationofc.NZ$14,wethinkanAdultNutritionroll-outcouldbeworthc.NZ$1.50pershareandweestimateUSFreshisc.NZ$1pershare.SoutheastAsiaistheotherkeygrowthfactor(DCFc.NZ$1.50),but,asAdrianAllbonCraigsInvestmentPartnersResearchAnalyst+64-9-9691070LukeMillsCraigsInvestmentPartnersResearchAnalyst+64-9-924-0508KeyChangesCompanyTargetPriceRatingATM.NZ12.50to15.00-SML.NZ9.50to10.00-Source:DeutscheBankDeutscheBankAG/SydneyThisresearchhasbeenpreparedinassociationwithCraigsInvestmentPartnersLimited.DeutscheBankdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Thus,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.DISCLOSURESANDANALYSTCERTIFICATIONSARELOCATEDINAPPENDIX1.MCI(P)091/04/2018.Distributedon:15/02/201920:27:10GMT7T2se3r0Ot6kwoPa16February2019Food&Beveragea2MilkandSynlaitoutlinedinrecentnotes,wehavealreadyslicedourinitialbullishexpectationanddon’texpectanymeaningfulrevenueuntilFY20.Targetpricechanges-ATM+20%toNZ$15andSML+5%toNZ$10WehaveliftedourATMgrowthforecaststoreflectthreekeyfactors:(1)greaterChinaregulatorycertainty,(2)higherUSfreshrevenuestoreflectthegrowingdistributionpointsandstrongATMmarketinginvestmentand(3)explicitlymodellingaUSadultnutritionopportunity(logicalleveragepointtoUSfresh).Asaresultofourearningsupgrade(FY19-23ENPATc.6%pa,longerterm+10%pa(USadultnutrition))plustimevalueofmoney,ourDCF-basedTPisnow+20%toNZ$15.0(avg.WACC8.6%,RFR4.5%andTGR3%).Keydownrisks:(1)foodquality/safetyissue,(2)regulatorydisruption,and/or(3)mgmt.executionofgrowthoptions(referreportforfurtherdetails).OurSMLTP+5%toNZ$10(avg.WACC8.4%,RFR4.5%andTGR2%)reflectstimevalueofmoney.OurearningstrackisunchangedwithhigherneartermATMvolumeoffsetbyweakerotherIFCbrandperformance,mainlyMunchkin.Keydownrisks:(1)regulatorychanges,(2)foodsafetyincidentand/or(3)executionofcapitalexpansionplans(referreportforfurtherdetails).Page2DeutscheBankAG/Sydney16February2019Food&Beveragea2MilkandSynlaitStrongdaigoufinishto1H19Key1H19groupmetrics■Weareexpectingtotal1H19revenueofNZ$609mnand+40%onpcp.Thekeyswingfactorsarewithintheinfantbusinessandspecificallyinventorybuild/selldown,whichouranalysisofrecentportdatasuggestsis+/-c.NZ$20mnandresultsinarevenuerangebetweenNZ$589mntoNZ$629mn,or+35%to45%growthonpcp.■Moreover,our1HsalesestimateimpliesastrongNov/Decmonthlyrevenuerunrateof+39%onpcptoNZ$120mnandrelativetoJul–Oct-18(4M19)runrateofNZ$92mnand+41%onpcp.■Divisionally,weareexpecting:(1)infantformularevenuetoprint+47%onpcpto+NZ$500mnandunderpinnedbyouranalysisofrecentportdataprintsanddailyonlinewebscrapinganalysis(detailedinsectionsbelow),(2)ANZfreshsales+12%onpcptoNZ$95mn,and(3)US/UK+57%onpcptoNZ$13.5mn(noteexcludingDBeNZ$15mnofUKinfantsales).■Ourotherkeyareasoffocusare:(1)MBSroll-outandthroughitsChinalabel%oftotalIFsales(DBe+3pponFY18to15%),(2)ChinaKantarmarketshare(DBe+0.2ppon1Q19MATto