PROVEN RESILIENCE ..., NOT YET INTEGRATED IN THE STOCK’S PRICE
A reassuring mid-term ..., under the sign of stability
Within an unprecedented health crisis context, marked by a rigid lockdown lasting over 90 days, Mutandis reported reassuring mid-term 2020 achievements. This is an almost stable revenue of MAD 683 Mn and an EBITDA of MAD 105 Mn recording a slight decrease of -1%.
Taking into account our own scenario for the year 2020, we forecast a slight increase in revenue of 1.1% against an almost stagnation of EBITDA. From 2021, the Group’s various activities would return to a normative growth rate allowing consolidated revenue and EBITDA to show sustained AAGR of 6.3% and 8.9% respectively.
Based on its cost structure, Mutandis' earning power would cross the threshold of MAD 100 Mn at the end of the 2020-2022 period, i.e. target AAGR of NIGS at 15.2%.
Diversification of activities supporting results’ resilience ...
The diversification of Mutandis' business portfolio makes perfect sense today. Indeed, the Group is showing good resilience in 2020 while maintaining a positive outlook over the medium term. These are 2 flagship activities which contribute to 80% of the consolidated EBITDA:
- The Detergent activity, which weighs 52% in EBITDA, shows a growth profile of 7.5% over the medium term while having an outstanding generating cash capacity. Ultimately, this activity will be supported by structural drivers such as: change in consumption habits, the age pyramid in Morocco and the extension of the distribution network ;
- The Seafood business, which weighs 28% in EBITDA, offers better potential in terms of improving margins with a relatively high risk due to its cyclical nature. In this context, we believe that the operator would benefit from a growing interest in international markets for canned pelagic fish. The increase in sales to the EU and the USA would ultimately justify the improved margins of this activity.
... and allowing the stock to benefit from the decrease in the cost of capital
Like resilient stocks on the Equity market, Mutandis stock would in turn benefit from the technical decrease in its cost of capital. Under the effect of the downward trend in sovereign rates in Morocco, the WACC of the Group would drop from 8.4% in 2018 to 7.9% in 2020. Taking into account our growth scenario, we come out with a target price of MAD 273 offering an upside potential of 33% on the stock market. Read more
