First half results were below expectations. Morgans forgives some of the miss, given the strategic decision to exit a large number of low-margin contract manufacturing arrangements, because it will build a better business over the medium term.
While making material downgrades to forecasts, the broker still expects strong earnings growth because of demand for the company’s products across Australia, Asia, and the Middle East.
Freedom Foods will also benefit from the scaling of new facilities and production of higher-margin dairy nutritional products. The broker maintains a Hold rating and reduces the target to $4.90 from $6.01.
Sector: Food, Beverage & Tobacco.
Target price is $4.90.Current Price is $4.92. Difference: ($0.02) – (brackets indicate current price is over target). If FNP meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges – negative figures indicate an expected loss).
