UBS assesses around 80% of management’s fourth profit warning relates to appropriate corrective action to tighten channel inventory and freshen product available in store and online.
The broker believes this should restore both the company’s and channel inventory to healthy levels by 1QFY22. It’s considered this will avoid brand damage and provide a platform for a solid English-label infant formula (IF) sales recovery between FY22 and FY24.
The Buy rating is maintained. The target is reduced to NZ$13.50 from NZ$15.50. UBS scenario analysis points to a share price range of $5.50-$17.00, with downside including no China IF recovery.
Sector: Food, Beverage & Tobacco.
Current Price is $6.10. Target price not assessed.
