European ingredients' strong Q1 implies higher momentum, pass-through of prices - JPM

Chr Hansen Holding A/S

18/05/2022 12:36

** After a strong Q1 for European ingredients, JPMorgan sees
a improved earnings momentum and hence turns more constructive
on the sector, but also more selective
    ** The brokerage highlights that companies in the sector
broadly maintained their outlooks, seeing it as a sign of
reliable volume demand with confidence in the ability to pass on
inflation-led pricing which is likely to carry over into 2023
    ** However, it flags low visibility on costs for H2 2022 and
FY 2023, with evidence that inflation may sustain at a high
level for longer
    ** The broker recognises a level of volatility across the
business environment and near-term squeeze to margin, but sees
it as largely embedded in market expectations with potential
upside ahead
    ** JPM favours Kerry  KYGa.I  ("overweight") as it offers
attractive entry point to a strong 2022
    ** It prefers Symrise  SY1G.DE  over Givaudan  GIVN.S  (both
"neutral"), citing relative valuation in the face of a weaker
revenue and margin delivery ahead
    ** The broker also maintains "neutral" on Chr Hansen
 CHRH.CO  as low visibility and revenue deceleration in H2 with
building pressure to margin may remain an overhang

 (Reporting by Marta Frackowiak)
 ((marta.frackowiak@thomsonreuters.com))