Morningstar

Morningstar, Inc.

Equity Bottom-Up

Despite falling by about 15% since the start of calendar 2019, shares in no-moat Inghams remain overvalued relative to our AUD 3.50 per share fair value estimate. While the company hasn’t provided any explicit earnings guidance, management recently confirmed it is comfortable with the current consensus estimates for fiscal 2019, which indicates about 3% EBITDA growth for the full year, broadly in line with our expectations
Our long-term earnings projections are broadly unchanged, and we…

Shares in Inghams are overvalued relative to our unchanged AUD 3.50 per share fair value estimate. We believe the market is overly optimistic about the likelihood Ingham’s will be retain the expected margin gains, following the ongoing cost-cutting program. Whilst we project the company to extract efficiencies in the near term, the intense competition from rival Baiada, exacerbated by the relatively weak bargaining position with supermarkets Coles and Woolworths, will limit the upside. These are…

Ingham's reported a relatively strong fiscal 2018 result, with underlying net profit after tax, or NPAT, up 10% to AUD 113 million, albeit in line with our expectations. The main driver of the earnings improvement was cost savings through Project Accelerate, which offset rising feed and utility costs, modestly higher Australian poultry volume (up 1.6%), an estimated 3% decline in the average selling price, and oversupply in the New Zealand market. On a more positive note, the balance sheet…

We are concerned by Inghams CEO Mick McMahon's decision to step down from the role. His departure part way through a major transformation program, for which he has been a key architect and an advocate, reduces confidence in the company's longer-term outlook. After joining Inghams in January 2015, his tenure as CEO will come to an end after the fiscal 2018 result in August. Chief commercial officer, or CCO, Quinton Hildebrand will take the reins as the interim CEO, while the company searches for…

Inghams Group delivered solid first-half fiscal 2018 net profit after tax of AUD 65.7 million, up 28% compared with pro forma first-half fiscal 2017. Adjusting for asset sales, restructuring costs, and a one-off tax credit, underlying interim NPAT was approximately AUD 57.5 million, broadly in line with our expectations. Key highlights included core chicken and turkey sales volumes, up 3.7% on the strong previous comparable period, or PCP; improved yields; lower unit costs; and improved asset…

Australia

Inghams Group Limited produces poultry products. The Company offers production, processing, and distribution of chickens, turkeys, stockfeed, and other meat products. Inghams Group serves retailers throughout Australia and New Zealand.

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