Morgan Stanley observes supermarket industry margins have re-based and this has paid off for the major operators. The broker believes execution will be a differentiator in supermarkets in 2020 and Woolworths has a margin advantage, partially reflecting its scale advantage. This is considered unlikely to be eroded over the medium term.
While acknowledging a benign backdrop, the broker still struggles to find meaningful valuation upside for Coles and downgrades to Underweight from Equal-weight. Target is raised to $13.50 from $13.00. Industry view: Cautious.
Sector: Food & Staples Retailing.
Target price is $13.50.Current Price is $15.66. Difference: ($2.16) – (brackets indicate current price is over target). If COL meets the Morgan Stanley target it will return approximately -16% (excluding dividends, fees and charges – negative figures indicate an expected loss).