14 Nov 2021 / by AP Securities (formerly Angping & Associates Securities)
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Summary of Broker’s Recommendation
| BROKER | RECOMMENDATION | TARGET PRICE | ISSUED ON |
|---|---|---|---|
| AP Securities | BUY | 19.00 | 15 Nov 2021 |
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Stock Rankings: All Stocks
Our Partner Broker’s Recommendation
We are slightly adjusting our Price Target to P19.00/share, as margins will likely continue to abate until 2022 from elevated raw material costs.
This is based on our 2022 Earnings per Share (EPS) estimate of P0.55 and premium P/E multiple of 35x given the growth narrative of Quorn. Additionally, the potential PSEi inclusion play next year should also support the more premium multiple.
Our Partner Broker’s Analysis
Heightened demand for noodles
Outperformance was due to the robust +4.2% year-on-year (YoY) sales growth of its APAC BFB segment in Q3 to P14.1 Billion. This was primarily driven by heightened demand for noodles and other staple food items as lockdowns were once again imposed in key cities in the Philippines.
MONDE’s gross margins fell by 160 bps YoY to 39.4% as prices of its main raw materials like wheat and palm oil surged from the global supply shock. However, this was mitigated by successful price increases implemented during Q2. EBITDA margins followed suit, declining by 330 bps YoY to 23.0% as OPEX ramped up in an effort to improve volumes through A&P.
Alternative Meat business promising
On the other hand, Q3 sales of its alternative meat business grew by 3.6% YoY to P3.6 Billion but we note that this was largely due to a favorable forex translation as the Peso weakened.
Organically, its alternative meat segment declined by 3.8% YoY. Nevertheless, we are starting to see food service sales picking up (Q3 +64% YoY) as restaurants gradually benefit from the reopening narrative worldwide.
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