Ahold Delhaize US margins run out of steam, but EU ready to pick up the pace

Following the disappointing set of 3Q23 results, we have adjusted our estimates to the downside but still bank on a 4% underlying EBIT margin for 2023 and beyond. Although we expect the US market will remain difficult in the upcoming quarters, we believe this will be countered by further margin recovery in Europe. Together with the healthy balance sheet, attractive shareholder remuneration and strong track record, we believe the more than 10% discount vs EU peers and more than 25% discount vs US peers is unjustified. In this note, we also take a closer look at the recently announced acquisition of Profi. Although we believe the transaction multiple is steep, we think it is justifiable based on the double-digit growth CAGR of the Romanian grocery market and implied synergies with the AD group and Mega Image. As we expected the acquisition to only increase the leverage by 0.2x, impact on the balance sheet should remain limited. We reiterate our Buy rating but slightly lower our TP from € 33.0 to € 32.0ps.