Viscofan: A pricey undisputed market leader
In this note we keep our Neutral rating on Viscofan but raise our FV to Eur59.6 from Eur52.5/sh, as we have rolled over our valuation to 2019E and slightly adjusted our estimates. Our long-term organic growth assumption moves from 2% to 2.5% as we are giving credit to the consistent market share gains Viscofan has been able to achieve and we assume this could continue albeit slowly. Also the industry has shown good resilience to the slowdown in 2016 and volumes are growing again. For 2019/2020E, our estimates are almost unchanged as the adverse fx evolution has offset positive impacts from M&A and slightly stronger estimated organic growth. Our estimates point to an improvement in margins driven by additional capacity, efficiency improvements and price hikes announced for 2H18 following inflation in raw material prices. Our estimates are supported by the momentum improving in the industry with volumes picking up and now prices are also going up. However we think the share price is already more than reflecting this as it trades well above its other main peer and also above historical multiples.Viscofan is the parent company of the Viscofan Group. Co. is divided into two major operational subgroups. The companies comprising the Naturin GmbH subgroup are engaged in the manufacture and distribution of artificial casings (small and big diameter collagen and plastics) for the meat industry. Through its wholly-owned subsidiary IAN, S.A., Co. also manufactures and distributes canned vegetables (asparagus, olives and tomato).
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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