Givaudan Q3 Sales Grow 3.1% on Strong Demand; Target Price CHF 4500 in Best Case

Givaudan, the global leader in the creation of fragrances and flavours, said its sales rose 3.1% on a like-for-like basis in the July-September quarter, supported by strong demand for household, health and personal care products during the COVID-19 pandemic.

In the first nine months of 2020 Givaudan recorded sales of CHF 4,790 million, an increase of 3.7% on a like-for-like basis and 2.7% in Swiss francs. Fragrance and beauty sales were CHF 2,199 million, an increase of 4.5% on a like-for-like basis and an increase of 5.3% in Swiss francs, the company said.

Flavour and fragrance maker further reported that its taste and wellbeing sales were CHF 2,591 million, an increase of 3.1% on a like-for-like basis and an increase of 0.6% in Swiss francs.

Givaudan’s shares closed 1.31% higher at CHF 4,033 on Wednesday; the stock is up over 30% so far this year.

Givaudan stock forecast

Ten analysts forecast the average price in 12 months at SFr.3,717.89 with a high forecast of SFr.4,500 and a low forecast of SFr.2,760. The average price target represents a -7.52% decrease from the last price of SFr.4,020 From those 10, four analysts rated “Buy”, three rated “Hold” and three rated “Sell”, according to Tipranks.

Morgan Stanley target price is CHF 3,265 with a high of CHF 4,950 under a bull scenario and CHF 2,800 under the worst-case scenario. UBS raised their target price to CHF 4450 from CHF 3900; Deutsche Bank upped their stock price forecast to CHF 3900 from CHF 3100.

Other equity analysts also recently updated their stock outlook. Berenberg upgraded rating to buy from hold, raised their target price to CHF 4,500 from CHF 3,650; Baader Helvea upgraded their target price to CHF 4,000 from CHF 3,070 and Citigroup raised their price target to CHF 4001 from CHF 1700.

Analyst view

“Valuation stands at all-highs, on c.25x FY20e EBITDA and 40x P/E. That said, our valuation work (including long-term growth models) points to a fair value of CHF 3,265 per share, equivalent to 25x EV/EBITDA, thereby reflecting Givaudan’s compounder growth characteristics and management track record,” said Lisa De Neve, equity analyst at Morgan Stanley.

“While long-term prospects look solid, with industry consolidation set to continue, in the near term we see risks from (1) EM market pressures, (2) consumer downtrading, (3) channel de-stocking and (4) slower innovation pipeline. Looking forward, solid LFL growth and high EPS growth look set to continue, although this hinges to a degree on accretion from M&A.”

Upside and Downside risks

Upside: 1) Continued relative preference for defensive exposure vs cyclicals. 2) Lower-for-longer Swiss bond yields. 3) Margins expand above expectations due to raw material deflation. 4) Value-accretive M&A– highlighted by Morgan Stanley.

Downside: 1) Deterioration in consumer sentiment, structural changes in consumer patterns. 2) Expensive acquisitions and capital intensity increasing further. 3) Raw material inflation and FX. 4) EM slowdown.