LOTUS BAKERIES: The rise of "snackification": Indulge in a healthy snack

Today we publish a company note on Lotus Bakeries titled “The rise of snackification: Indulge in a healthy snack”. We updated our model as we think Lotus Bakeries can benefit from the trend towards more on-the-go snacks to meet consumer demand for convenience, portability, and nutrition. We also included in our model update Lotus Bakeries’ ambition to make Lotus Biscoff one of the largest cookie brands in the world. The target is to continue to achieve double-digit growth with Lotus Biscoff in the years ahead. We maintain our Hold rating but increase our Target Price to € 5 450, in line with our updated DCF.

In our note we highlight that – with most global consumers expecting snacks to offer a nutritional boost – healthy snacking, Lotus Bakeries’ second pillar, is no longer a niche corner of the snacking universe. As for the global snacking market, we will also dive into some deeper trends for the healthy snacking market.

In our note, we have also included additional upside to our previous sales forecasts as we see products being rolled out faster than we had expected. We also took into account the more than expected growth in 1H21.

Lotus Bakeries has indeed again achieved strong growth in 1H21 with a level of profitability which rises even more proportionally at both the level of recurring operating profit and net profit. Net profit has risen by 25% or almost €10m. The strategic growth pillars Lotus Biscoff and Lotus Natural Foods have both contributed to that growth and profitability. Lotus Biscoff has achieved significant growth of 20% in 1H21, including through the reopening of the out-of-home channels and the further internationalisation of the Lotus Biscoff Sandwich Cookie.

In 2020, the foundations of the growth strategy for Lotus Natural Foods were reinforced further. The benefits of these investments are being reaped as early as 2021. 2Q21 was the best quarter result ever achieved in the history of Lotus Natural Foods, with a growth rate 40% higher y/y.

So, our model update reflects Lotus Bakeries’ ambition to make Lotus Biscoff one of the largest cookie brands in the world. The target is to continue to achieve double-digit growth with Lotus Biscoff in the years ahead. We also highlight that – with most global consumers expecting snacks to offer a nutritional boost – healthy snacking, Lotus Bakeries’ second pillar, is no longer a niche corner of the snacking universe. We maintain our Hold rating but increase our Target Price to € 5 450, in line with our DCF.

We also welcome Lotus Bakeries’ intention to step up its investor relations activity, in relation to both present and future investors. Lotus Bakeries also wants to increase the velocity of the stock and attract a more diversified share ownership.