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27 Jul 2022
H122 results and 15 questions for management
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H122 results and 15 questions for management
Reckitt Benckiser Group plc (RKT:LON) | 4,612 46.1 0.0% | Mkt Cap: 32,494m
- Published:
27 Jul 2022 -
Author:
Omanadze Mikheil MO | Stent Jeff JS | Karia Vyoma VK -
Pages:
13
Summary of Q2/H122 results
A strong Q2/H1 for Reckitt with Q2 LFL sales at +11.9% coming materially ahead of co. consensus (+6.8%) with all divisions materially ahead (especially Health and Nutrition). H1 margins were 290bp ahead of co. cons. (albeit including +85bp from a land sale in Asia). The quantum of the top-line and margin beats translated into EBIT coming c.16% ahead of co. consensus and EPS coming c.18% ahead. The H1 DPS at GBP0.73 was flat YOY and in-line with our expectation.
News
We highlight that Q2 LFL growth would have been +8.6% (vs. the +11.9% reported) excluding the estimated benefit from US infant formula supply.
Earnings
We revise our FY22e/FY23e/FY24e EPS by +10%, +9% and +9% respectively (principally as a consequence of incorporating the strong H1 development).
Investment thesis
Given the myriad of exceptional influences upon Reckitt''s growth at present (Lysol normalisation, US Nutrition, OTC season, pricing), we struggle to see how the market can get confidence that Reckitt can be more a 6% mid-term organic growth story than a 4% one. We thus have difficulty seeing what could trigger a relative re-rating.
Rating / target price
We maintain our Neutral rating. Reflecting our EPS revisions and the 6-month roll-forward of our target earnings base, our target price moves from GBP65 to GBP74.
15 questions for management
How do you incentivise a business that you appear to have limited appetite to continue to be an owner of (US Nutrition)?