Orkla (Hold, TP: NOK87.00) - Improved contribution margins and volumes to support EBIT growth
We are slightly positive ahead of the Q2 results (due at 07:00 CET on 15 July), expecting adj. EBIT 5% above consensus on slightly higher Orkla CPC revenues and margins and Hydropower EBIT. We reiterate our HOLD, but have raised our target price to NOK87 (81) after increasing our estimates. At our target price the stock would be trading broadly in line with its historical average discount to our SOTP.Orkla is a consumer goods company in the Nordic and Baltic regions. The Branded Consumer Goods area comprises five business areas: Orkla Foods, Orkla Confectionery and Snacks, Orkla Home and Personal, Orkla International and Orkla Food Ingredients. Co.'s other businesses consist of Granges, a supplier of solutions for the heat exchanger industry; Hydro Power, which produces and supplies power to the Nordic power market; and Orkla Financial Investment, which consists of Orkla Eiendom; in addition to its investments in Sapa (JV), which is engaged in extruded aluminium solutions; and Jotun AS, which is a manufacturer of paint and powder coatings.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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