Credit Suisse has been surprised by the extent to which Metcash outperformed in the second half, particularly noting an acceleration in market share gains by IGA during the fourth quarter was in opposition of market expectations that the brand would lose market share post-covid.
The broker does expect IGA to lose some ground to competitors as inflation drives an increase in value consciousness from consumers, but notes the company is more leveraged to food inflation than peers and inflation should benefit the company’s profit line.
The rating is downgraded to Neutral from Outperform and the target price decreases to $4.67 from $4.70, largely on a reduction to the multiple used in the Hardware pillar.
Sector: Food & Staples Retailing.
Target price is $4.67.Current Price is $4.30. Difference: $0.37 – (brackets indicate current price is over target). If MTS meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).
