Higher input costs are expected to weigh on the FY23 recovery, mainly relating to increased milk supply costs but also packaging, freight, labour and electricity. As a result, UBS now sits -7% below consensus forecasts for FY23 EBITDA, at $214m.
The broker acknowledges the valuation of Bega Cheese is relatively undemanding and broadly in line with the long-term average.
Although one-offs related to the pandemic, floods and China’s lockdowns will not be repeated in FY23, the broker believes cost inflation will still be a significant headwind. Neutral maintained. Target is reduced to $4.75 from $5.40.
Sector: Food, Beverage & Tobacco.
Target price is $4.75.Current Price is $4.35. Difference: $0.40 – (brackets indicate current price is over target). If BGA meets the UBS target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).
