Verallia confirmed at BUY, TP EUR 28.5 - The glass is half full
In the aftermath of the 1Q results release we keep the BUY recommendation on Verallia but lower the target price to EUR 28.5 from EUR 32 as we have incorporated Covid-19 related forecast cuts. For FY 20e we forecast revenues to decline 7% yoy to EUR 2.41 bn and adj. EBITDA to drop 10% to EUR 553 mn (margin -80 bps to 23.0%). It goes without saying that it will take some time until demand and volumes will reclaim pre-crisis levels, but the key building blocks of the investment case remain intact. Bearing in mind that the share price has plunged 35% from the mid-February highs (ytd -24%) we consider the current level a compelling entry point. We assume that the trajectory of earnings and margin improvement should be resumed as of FY 21e. Despite lower earnings projections, the group should sustain compelling cash conversion as also investments needs will be lower. We project an average FCF yield of 8% for FY 20-21e.Verallia Deutschland AG, formerly Saint Gobain Oberland AG, is a Germany-based producer of glass containers and packages. It focuses on the production of glass bottles and jars for food and and drinks, including for beer, wine, sparkling wine, liquor, water, soft drinks, baby food and canned food. The Company's product range includes bottles and jars in various shapes, sizes and colors. The Company operates as subsidiary of Saint-Gobain Emballage SA, and has production sites in Essen, Wirges, Neuburg and Bad Wurzach in Germany, in Zorya in the Ukraine, as well as in Kamyshin and Kavminsteklo in the Russian Federation. Its subsidiaries are Black Sea Glass Packaging llc, GPS OBerland GmbH, Private JSC Consumers-Sklo-Zorya, JSC Kavminsteklo, ZAO Kamyshinsky Steklotarny Zawod and YAO STI.
Verallia SAS Formerly known as Verallia SASU. Verallia SASU is a France-based company, which operates as a producer of glass packaging solutions. The Company manufactures a number of jars and bottles for various markets, including the still and sparkling wine, spirits, food, as well as the beer and nonalcoholic sectors. Apart from France, the Company also operates in many countries in Western Europe, Eastern Europe and South America, among others.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
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