JDE Peet’s N.V. (JDEP.AS) Momentum pick – BUY…!
- Rating Changed. With this brief note, we are adjusting our investment rating to BUY MEDIUM RISK from SELL HIGH RISK on JDE Peet’s N.V. (JDEP.AS), and we are adjusting our price objective to €25 from €22/shr. YTD, the shares are down by approximately 22.0%, and we believe that the shares are attractive at their current level; thus, we recommend accumulating the shares despite the low float of 22.9%.
- Growing Consumption Rate. Worldwide, JDE Peet’s coffee is consumed at a rate of 4,100-4,500 cups/second in more than 100 markets, with a portfolio of more than 51 brands and growing, plus the completed acquisition of Marata’s Coffee & Tea in Brazil in Q124. The company currently distributes the following coffee brands in Brazil; Caboclo, Café do Ponto, Café Pelé, Damasco, Moka, and Pilão. Currently, the company has three production facilities in São Paulo, Minas Gerais and Bahia. This expansion in one of the world’s largest coffee markets should act as a major growth catalyst going forward.
- China Segment. According to our conversation with management, they are considering halting additional Peet’s stores in North America. With China’s consumption rate per capita improving to 11 cups in 2022 compared to 6.2 cups in 2018, going forward, they are turning their focus to the China market. JD Peet’s operate approximately more than 200 Peet’s Coffee stores across China. We note that Beijing boasts the highest number of Peet’s Coffee at 44 follow by Nanjing at 19. We expect the number of Peet’s Coffee to incrementally increase by an additional 100-120 coffee stores by 2025-26 from the current 200+ stores in China. The long-term prospects remain strong given the trend of increasing coffee consumption rate per capita in China.
- New CEO. We expect management to announce a new CEO to lead the company.
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