On Tuesday, Citi revised its price target for Jeronimo Martins SGPS SA (GEM:GR) (OTC: OTC:JRONY), a leading international food retailer, reducing it to €20.00 from the previous €24.00. Despite the change in price target, the firm maintained a Neutral rating on the stock.
The adjustment in price target comes after the company reported fourth-quarter and full-year results that aligned with expectations and before the first-quarter results for 2024, which are scheduled for release on April 26. Citi anticipates that Biedronka, Jeronimo Martins' Polish operation, will post approximately 5% like-for-like (LFL) sales growth, which includes a beneficial impact from the early Easter and leap year. This growth is expected to be driven primarily by volume outperformance.
For the first quarter, Citi expects Biedronka's EBITDA to be around €438 million, with a margin of 7.8%, which would represent a 30 basis points decrease year-over-year. This projection reflects the management's indication of increased pressure due to price investments and general and administrative expenses (SG&A) inflation.
In Colombia, Citi forecasts low single-digit LFL sales growth for Ara, Jeronimo Martins' Colombian brand, as it continues to strengthen its competitive pricing strategy in a market experiencing negative volumes.
Looking at the full year 2024, Citi forecasts the group's EBITDA to reach €2,369 million, a 9% increase from the previous year, with a profit margin of 6.8%, slightly down from the previously forecasted 7.0%. The firm's sum-of-the-parts (SOTP) valuation, which takes into account the sector rating for Portugal and a roughly 25% premium for Biedronka, led to the lowered target price. Citi's comprehensive model is available upon request.
InvestingPro Insights
In light of Citi's recent revision of Jeronimo Martins' price target, current data from InvestingPro provides additional context for investors. The company's market capitalization stands at $12.51 billion, reflecting its significant presence in the retail market. Despite recent challenges, Jeronimo Martins trades at a P/E ratio of 15.26, which is considered low relative to its near-term earnings growth. This suggests that the stock may be undervalued, especially when considering the company's positive revenue growth of over 20% in the last twelve months as of Q4 2023.
InvestingPro Tips indicate that Jeronimo Martins' stock is currently in oversold territory according to its RSI, and it's trading near its 52-week low, which could present a buying opportunity for long-term investors. Moreover, the company's short-term obligations exceeding liquid assets is a point of caution, but with analysts predicting profitability this year and a moderate level of debt, the financial health of the company is nuanced.
For those seeking a more in-depth analysis, there are 7 additional InvestingPro Tips available for Jeronimo Martins, which can be accessed through InvestingPro's platform. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain comprehensive insights that could inform your investment strategy.
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