This content is only available within our institutional offering.
26 Jul 2023
Better than we feared but still not compelling (and 30 qs)
Sign in
This content is only available to commercial clients. Sign in if you have access or contact support@research-tree.com to set up a commercial account
This content is only available to commercial clients. Sign in if you have access or contact support@research-tree.com to set up a commercial account
Better than we feared but still not compelling (and 30 qs)
- Published:
26 Jul 2023 -
Author:
Gwynn Andrew AG -
Pages:
13
France was the highlight of H1 but beware of the law of small numbers!
With French H1 EBIT up 40% year on year and 26% ahead of consensus, it''s tempting to look at Carrefour''s equity story in a very favourable light. Though we don''t doubt progress, law of small numbers is at work and even after the beat, the French EBIT margin was just 1.4% in H1... not much evidence of ''greedflation'' here! With Brazil subdued (though a bit better than feared) but other Europe soft (flat so a miss with a recovery in Belgium not evident and Poland weak) the whole was less compelling with a 4% beat albeit, also on a small number (just over 1% on FY EBIT).
Our EBIT forecasts are little changed - we still see risks to FY numbers
For the FY, we barely move our EBIT forecasts and so though we''ll have to see where consensus settles, we suspect there''s still some downside (we''re about 7% lower than Visible Alpha consensus) with forecasts on LatAm the notable point of over-optimism we think. Coupled with ordinary valuation, it means we stay Underperform. Higher one-offs (EUR186m or 25% of recurring H1 EBIT) plus sale and leaseback proceeds in free cash flow take the edge off some of the reporting for us too.
Brazilian financial services a prop for Q2. We hike our TPs
Q2 earnings from Carrefour Brasil released on Tuesday night were as soft as we expected in cash and carry and retail, a combination of Grupo Big dilution, store conversions and underlying weakness (destocking) weighing. The more volatile financial services division however was better. Again we barely shift our EBIT forecasts there as though the tone is of H2 as a ''new chapter'' we and consensus model it and financial services can be volatile. We do though realign our TP to the share price (BRL12 from BRL9.5) which takes our Carrefour Group TP to EUR17 (from EUR15.5).
French market has been bolstered by Casino''s market share losses
Less talked about, but a consideration for H2 is competition in the French...