Verallia confirmed at BUY, TP EUR 32 - Model update: Minor estimate changes, TP upped to EUR 32
We retain the BUY recommendation on Verallia on the back of a target price increase to EUR 32 from EUR 28.5. Despite leaving adjusted EBITDA forecasts throughout FY 22e unchanged, we have raised our net profit expectations by 9% on average. Coupled with higher sector multiples this essentially drove the higher valuation. The group proved reasonably resilient in 2Q, having returned to volume growth in June and indicating about stable volumes July. Hence, we regard the FY 20e outlook as far from being stretched but acknowledge limited visibility, especially as regards the demand development in the important on-trade channel. A stringent cost focus and operational efficiency gains as well as price discipline stand at the core. Except for the top-line growth, the management reiterated the mid-term targets for profitability, financial leverage and dividends, which bodes well for our view voiced after the 1Q results that the investment case (featuring decent volume growth prospects, margin improvement and attractive cash flow generation and shareholder returns) is only temporarily impacted by Covid-19 but not structurally challenged. Apart from the inflection of volume growth we think that price negotiations towards year-end will be key catalysts in the short run.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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