Following a significant improvement in the pulses and vegetables line and the sauces business, La Doria has reported an impressive 7.6% growth in revenue at constant currency for 9M17, which implies 8.0% growth during the latest quarter. The growth was mainly volume-driven, which is positive. As expected, group margins were lower during the period. Overall guidance, however, has been raised as volume growth is ahead of management expectations and the margin contraction has been less than feared. We raise our FY17 forecasts again in light of the positive 9M17 results. Our fair value increases to €16.90 from €15.54/share.
While the overall trading environment remains tough, with continued pressure from the supermarkets amid heightened competition and continued sterling weakness, La Doria’s businesses are witnessing an improvement in performance. The pulses and vegetables line and the sauces business both posted revenue growth of over 10% at constant currency, which was mainly volume-driven. In terms of geographies, the overseas markets fared better than the domestic market, and exports now account for 79% of group sales.
As outlined in the company’s latest three-year business plan (last updated in March), management expected the recovery to commence in H217 following a better 2017 tomato campaign over the summer and more favourable vegetable harvests, and then to come through fully in the 2018 numbers. This continues to be our expectation, although the latest results demonstrate that the recovery is coming through more quickly than management expected.
Based on our forecasts, our DCF model points to a fair value of €16.90 per share, or c 4% upside from the current share price. La Doria trades on 15.4x FY18e P/E, a c 20% discount to its private-label peer group, while on 10.5x FY18e EV/EBITDA, it trades at a c 18% premium to the peer group. We believe La Doria remains an attractive proposition given the strength of its market position in the private-label segment, and management’s commitment to improve the stability and visibility of the business by reducing reliance on the more volatile tomato line.