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  1. ab 7 August 2024Global Research and Evidence LabFirst ReadCoca-Cola Europacific PartnersQ2 volume miss and no guidance raise implies -LSD% downgradesUBS view: The scale of the Q2 volume miss in Europe is worse than expected, predominantly due to less favourable weather trends in June. No change to FY guidances implies -LSD% consensus downgrades, however the implied H2 guidance guidance at first glance appears conservative given easier Europe comparatives in Q3 and 2 extra selling days in Q4.FY24 outlook unchanged: CCEP reiterated its FY24 guidance of 1) +4% organic revenue growth (VUMA cons +5%), with H1 +3.5% implies H2 +4.5%; and 2) +7% organic EBIT growth (VUMA cons +8.3%) implying H2 +5% after H1 +9%, despite easier comparatives in Europe in Q3 and 2 extra selling days in Q4. COGS per case is now expect to be +3% (down from 3-4%), with commodity inflation flat from +LSD% previously (FY24 hedge coverage now 90% v 85% in Apr), and excise tax increases in the Netherlands. On below the line items, the guidance for net finance costs 2%, tax 25% and Capex 5% of revenue is unchanged. Based on the updated FY guidance, we expect consensus EPS to come down by low-single digit. H1 org EBIT intact, org revenue miss driven by weaker volume in Europe: Q2 organic revenue +1.8% came in well below company compiled cons +4.7%, driven by volumes miss -0.7% (cons +1.5%) and lower price/mix (+2.5% v cons +3.2%) - despite the Coca-Cola Company's recent cautious comments on the region at its Q2 results, the scale of the Europe miss is weaker than expected.On volumes, Europe -4% was well below expectations (VUMA cons +0.7%) due to less favourable weather in UK and Northern Europe and the end of Capri-Sun partnership (UBSe c-1%) - Q2 Away from Home channel volumes were -4.2% (Q1 -4.6%), however Home channel volumes were also -4%. Europe price/mix +4.4% ahead of cons +3.7%, supported by a carryover effect of prior year pricing. Within APS, another quarter of good volume growth +6.9% (VUMA +4.2%), supported by strong underlying trends in Philippines continues and Australia Pacific now lapping bulk water delisting, partially offset by weaker Indonesia (boycott impact and Ramadan phasing). Price/mix was -0.4%, behind VUMA cons +1.4% due to negative country mix from Philippines (lower rev/case). Highlights (€m) 12/21 12/22 12/23 12/24E 12/25E 12/26E 12/27E 12/28ERevenues 13,763 17,320 18,302 21,031 21,871 22,698 23,566 24,478EBIT (UBS) 1,772 2,138 2,373 2,679 2,873 3,068 3,273 3,505Net earnings (UBS) 1,292 1,551 1,701 1,821 1,941 2,060 2,181 2,324EPS (UBS, diluted) (€) 2.83 3.39 3.71 3.95 4.26 4.67 5.11 5.63DPS (net) (€) 1.40 1.68 1.84 1.98 2.13 2.34 2.56 2.81Net (debt) / cash (11,733) (10,520) (9,977) (10,120) (10,131) (10,591) (10,988) (11,337)Profitability/valuation 12/21 12/22 12/23 12/24E 12/25E 12/26E 12/27E 12/28EEBIT (UBS) margin % 12.9 12.3 13.0 12.7 13.1 13.5 13.9 14.3ROIC (EBIT) % 11.4 11.5 13.1 14.1 14.4 15.4 16.4 17.5EV/EBITDA (UBS core) x 12.8 11.5 11.6 11.4 10.4 9.5 8.8 8.0P/E (UBS, diluted) x 16.6 14.4 15.2 17.1 15.8 14.4 13.1 11.9Equity FCF (UBS) yield % 6.4 9.3 7.1 6.0 6.4 6.8 7.1 7.5Dividend yield (net) % 2.9 3.5 3.3 2.9 3.2 3.5 3.8 4.2Source: Company accounts, LSEG Eikon, UBS estimates. Metrics marked as (UBS) have had analyst adjustments applied. Valuations: based on an average share price that year, (E): based on a share price of US$ 73.48 on 06-Aug-2024This report has been prepared by UBS AG London Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 7. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their saschasha@ sinopaccominvestment decision.EquitiesAmericasSoft Drinks12-month rating Buy12m price target US$82.50Price (06 Aug 2024) US$73.48RIC: CCEP.OQ BBG: CCEP USTrading data and key metrics52-wk range US$75.97-57.12Market cap. US$33.5bShares o/s 456m (COM)Free float 45%Avg. daily volume ('000) 593Avg. daily value (m) US$43.8Common s/h equity (12/24E) €8.92bP/BV (12/24E) 3.5xNet debt to EBITDA (12/24E) 2.8xUBS Cons.EPS (UBS, diluted) (€)12/24EI1E 1.92 -I2E 2.03 -12/24E 3.95 3.9712/25E 4.26 4.2912/26E 4.67 4.69Sanjeet AujlaAnalystsanjeet.aujla@ubs.com+44-20-7567 4529Andrei CondreaAnalystandrei.condrea@ubs.com+44-20-7568 5061Ella HongAssociate Analystella.hong@ubs.com+44-20-7568 3972eport. Investors should conside sascha.sha@ sinopac.com
  2. First Read: Coca-Cola Europacific Partners 7 August 2024 sascha.ab 2H1 24 EBIT/EPS: With H1 organic sales up +3.5% (v VUMA cons +5.0%), organic EBIT came in at +9% (v VUMA +7.8%). This implies H1 organic EBIT margin +70bps (consensus +30bps), driven by +20bps gross margin expansion, and +50bps on Opex. CCEP delivered EPS €1.98, +3% ahead of cons €1.93 mainly due to lower tax rate (timing). Key focus area for the conference call (12pm BST / 1pm CET - webcast via link): 1) Impact of weather in Europe so far on Q3 performance; 2) Update on Philippines and Indonesia underlying industry trends and integration progress; 3) Update on CFO transition and 4) commentary on potential UK listing and FTSE inclusion.gust 2024 sascha.sha@ sinopac.com
  3. First Read: Coca-Cola Europacific Partners 7 August 2024 sascha.ab 3Figure 1: CCEP Q2/H1 results vs consensusQ2 24 Q2 24 Q2 24 H1 24 H1 24 H1 24Reported Consensus Difference - bps Reported Consensus Difference - bpsOrganic volume -0.7% 1.5% -210bps 0.6% 1.7% -110bpsPrice/mix 2.5% 3.2% -70bps 2.9% 3.2% -40bpsOrganic revenue 1.8% 4.7% -290bps 3.5% 5.0% -150bpsScope 0.0% 0.0% 0bps 0.0% 0.0% 0bpsFX -0.2% -1.0% 80bps -0.6% -1.0% 40bpsTotal 1.6% 3.7% -210bps 2.9% 4.0% -110bpsNet Revenue 5,363 5,473 -2% 10,096 10,206 -1%Cost of sales -6,534 -6,622Gross profit 3,562 3,584 -1%Gross profit margin - % 35.3% 35.1%Organic chge - bps 20bps 50bps -30bpsScope/FX impact - bps 0bps -50bps 50bpsReported chge - bps 20bps 0bps 20bpsOpex -2,256 -2,280 -1%as % net sales 22.3% 22.3%EBIT 1,306 1,304 0%EBIT margin - % 12.9% 12.8% 20bpsOrganic chge - bps 70bps 30bps 40bpsScope/FX impact - bps -10bps 10bps -20bpsReported chge - bps 60bps 40bps 20bpsOrganic EBIT 9.0% 7.8% 120bpsScope 0.0% 0.0% 0bpsFX -0.3% -0.5% 10bpsTotal 8.7% 7.3% 130bpsEBIT 1,306 1,304 0%Net finance costs -90 -94PBT 1,216 1,210 0%Tax expense -275 -303Tax rate - % 22.6% 25.0%Minority interest/other -31 -6Profit after tax 910 901Average shares - diluted 460 467Diluted EPS 1.98 1.93 3%Free cash flow 539 523 3%Source: Company data, UBSgust 2024 sascha.sha@ sinopac.com
  4. First Read: Coca-Cola Europacific Partners 7 August 2024 sascha.ab 4Figure 2: Europe and API segment volume and price/mix trendsQ2 24 Q2 24 Q2 24 H1 24 H1 24 H1 24Reported Consensus Difference - bps Reported Consensus Difference - bpsOrganic volumeEurope -4.0% 0.7% -480bps -2.8% -0.2% -260bpsAPS 6.9% 3.9% 310bps 7.5% 6.0% 150bpsTotal -0.7% 1.5% -210bps 0.6% 1.7% -110bpsPrice/mixEurope 4.4% 3.8% 60bps 4.9% 4.6% 40bpsAPS -0.4% 1.7% -210bps 0.0% 0.9% -90bpsTotal 2.5% 3.2% -70bps 2.9% 3.2% -40bpsOrganic sales growth Europe 0.3% 4.6% -430bps 2.0% 4.3% -240bpsAPS 6.4% 5.6% 80bps 7.4% 7.0% 40bpsTotal 1.8% 4.7% -290bps 3.5% 5.0% -150bpsSource: Company data, UBSFigure 3: CCEP Margin bridgeH1 23 H2 23 FY 23 H1 24Organic growth % YoY v 2019Organic volume 0.8% -2.0% -0.6% 0.6%Price/mix 9.8% 7.6% 8.6% 2.9%Organic revenue 10.7% 5.4% 8.0% 3.5%Cost of sales 9.8% 3.7% 6.6% 3.1%Gross profit 12.2% 8.5% 10.3% 4.2%Opex 11.6% 6.1% 8.7% 1.6%EBIT 13.2% 13.5% 13.4% 9.0%Cost of sales per case 9.0% 5.9% 7.3% 2.5%Organic margin - bps YoY v 2019Gross profit 50bps 110bps 80bps 20bpsOpex -20bps -10bps -20bps 40bpsEBIT 30bps 90bps 60bps 70bpsSource: Company data, UBSgust 2024 sascha.sha@ sinopac.com
  5. First Read: Coca-Cola Europacific Partners 7 August 2024 sascha.ab 5Forecast returnsForecast price appreciation 12.3%Forecast dividend yield 3.1%Forecast stock return 15.3%Market return assumption 9.0%Forecast excess return 6.3%Company DescriptionCoca-Cola Europacific Partners (CCEP) produces, markets, sells, and distributes beverages in Western Europe, Australia, New Zealand, Indonesia, Papua New Guinea, Fiji and Samoa. It is the largest independent Coca-Cola bottler on revenue serving 600 million consumers. The company's product portfolio includes carbonated soft drinks, energy drinks, still and sparkling waters, juices, sports drinks, ready-to-drink teas, coffee and ready to drink alcoholic beverages.Valuation Method and Risk StatementValuation method: multiples based framework, using a 2025E 20.2x EV/NOPAT, in line with current trading.Risks to our price target include any material changes in: (a) General consumer preferences and/or government regulation pertaining to the consumption of Beverage/Tobacco products (including taxation, restrictions on sales, the introduction or subsidization of substitute products, etc.); (b) Government regulation with respect to commerce and/or taxation in general; (c) Macroeconomic trends, interest rate, and/or credit environments within any of our companies' key markets; (d) Competitive intensity between Beverage/Tobacco companies within any of our companies' key markets; (e) Customer or supplier relationships; (f) Commodity cost and/or foreign exchange fluctuations; (g) Our companies' own ability to execute, whether with respect to R&D, sales and marketing, and/or ongoing productivity efforts; (h) Our companies' stance towards M&A (whether related to acquisitions, JVs, divestments, or otherwise), or the prioritization of cash in general (whether related to organic business investment, dividends, share repurchases, etc.).gust 2024 sascha.sha@ sinopac.com
  6. First Read: Coca-Cola Europacific Partners 7 August 2024 sascha.ab 6Quantitative Research ReviewUBS Global Research publishes a quantitative assessment of its analysts' responses to certain questions about the likelihood of an occurrence of a number of short term factors in a product known as the 'Quantitative Research Review'. The views for this month can be found below. Views contained in this assessment on a particular stock reflect only the views on those short term factors which are a different timeframe to the 12-month timeframe reflected in any equity rating set out in this note. For previous responses please make reference to (i) previous UBS Global Research reports; and (ii) where no applicable research report was published that month, the Quantitative Research Review which can be found at https://neo.ubs.com/quantitative, or contact your UBS sales representative for access to the report or the Quantitative Research Team on qa@ubs.com. A consolidated report which contains all responses is also available and again you should contact your UBS sales representative for details and pricing or the Quantitative Research Team on the email above. Coca-Cola Europacific Partners Question Response1. Is the industry structure facing the firm likely to improve or deteriorate over the next six months? Rate on a scale of 1-5 (1 = getting worse, 3 = no change, 5 = getting better, N/A = no view) 4 2. Is the regulatory/government environment facing the firm likely to improve or deteriorate over the next six months? Rate on a scale of 1-5 (1 = getting tougher 3 = no change, 5 = getting better, N/A = no view) 3 3. Over the last 3-6 months in broad terms have things been improving/no change/getting worse for this stock? Rate on a scale of 1-5 (1 = getting a lot worse, 3 = not much change, 5 = getting a lot better, N/A = no view) 4 4. Relative to the current CONSENSUS EPS forecast, is the next company EPS update likely to lead to: (1 = negative surprise vs consensus, 3 = in-line with consensus, 5 = positive surprise vs consensus expectations, N/A = no view) 3 5. What’s driving the difference?6. Relative to YOUR current earnings forecast, is there relatively greater risk at the next earnings result of:(1 = downside skew risk to earnings, 3 = equal upside or downside risk to earnings, 5 = upside skew risk to earnings, N/A = no view) 3 7. What’s driving the difference?8. Is there an upcoming catalyst for the company over the next three months? No Catalyst 9. Is there an actual or approximate date for the catalyst?10. Is the catalyst date an actual or approximate date?11. What is the catalyst?gust 2024 sascha.sha@ sinopac.com
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