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Equity Bottom-Up

Greggs’ Q221 trading has surprised on the upside, with positive two-year like-for-like (lfl) sales growth continuing through the end of the period, having previously reported a return to growth earlier than expected. We upgrade our revenue forecasts for FY21, assuming a positive lfl outturn for the rest of the year, versus negative previously, leading to PBT upgrades for FY21 and FY22 of 18%. The strength of the recovery also leads us to increase our dividend forecast for FY21 by more than 150%. The P/E for FY22 of 22.4x is consistent with Greggs’ average trading multiples before COVID-19, reflecting its medium-term growth outlook and shareholder returns, but below prior peak multiples.

Greggs’ Q221 trading has surprised on the upside, with positive two-year like-for-like (lfl) sales growth continuing through the end of the period, having previously reported a return to growth earlier than expected. We upgrade our revenue forecasts for FY21, assuming a positive lfl outturn for the rest of the year, versus negative previously, leading to PBT upgrades for FY21 and FY22 of 18%. The strength of the recovery also leads us to increase our dividend forecast for FY21 by more than 150%. The P/E for FY22 of 22.4x is consistent with Greggs’ average trading multiples before COVID-19, reflecting its medium-term growth outlook and shareholder returns, but below prior peak multiples.

Greggs - Rate of recovery continues to surprise

Gregg’s trading update indicates a strong rebound in trading since the re-opening of non-essential retail in April 2021, with positive like-for-like (LFL) sales growth versus FY19, which is earlier than we had expected. This is significant as it has been achieved despite not operating at full potential (ie reduced SKUs, shorter opening hours and other social distancing measures) and competition has been more limited, though both will normalise in coming months. With strong cost controls, including temporary benefits, the board believes that FY21 profits could be around 2019 levels in the absence of further restrictions. We upgrade our FY21 PBT forecasts by 64%, due to a less pessimistic LFL sales assumption.

Gregg’s trading update indicates a strong rebound in trading since the re-opening of non-essential retail in April 2021, with positive like-for-like (LFL) sales growth versus FY19, which is earlier than we had expected. This is significant as it has been achieved despite not operating at full potential (ie reduced SKUs, shorter opening hours and other social distancing measures) and competition has been more limited, though both will normalise in coming months. With strong cost controls, including temporary benefits, the board believes that FY21 profits could be around 2019 levels in the absence of further restrictions. We upgrade our FY21 PBT forecasts by 64%, due to a less pessimistic LFL sales assumption. 

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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Equity Capital Markets

<a href="https://www.smartkarma.com/entities/monde-nissin-corp" target="_blank" data-smartkarma-citation="entities:32188:1" rel="noopener">Monde Nissin Corp (0191881D PM)</a> is a leading food manufacturer in the Philippines with flagship brands such as Lucky Me! for instant noodles and Quorn for meat alternative products. Monde Nissin ranked first in retail sales value in the Philippines with its instant noodles, biscuits, oyster sauce and yoghurt drinks in 2020, according to Nielsen. Monde Nissin will launch pre-marketing for an IPO to raise up to PHP63 billion ($1.3 billion) in April, according to press reports. <div class="content-highlight">Monde Nissin is a play on the growing demand for consumer staples in the Philippines and Thailand and the healthy food category on a global scale. Monde Nissin’s financial track record shows it has been able to combine modest top-line growth with improving margins and cash generation. Overall, we believe that Monde Nissin’s fundamentals are attractive.</div>

Monde Nissin Corp (0191881D PM) is a leading food manufacturer in the Philippines with flagship brands such as Lucky Me! for instant noodles and Quorn for meat alternative products. Monde Nissin ranked first in retail sales value in the Philippines with its instant noodles, biscuits, oyster sauce and yoghurt drinks in 2020, according to Nielsen. Monde Nissin will launch pre-marketing for an IPO to raise up to PHP63 billion ($1.3 billion) in April, according to press reports. Monde Nissin is a play on the growing demand for consumer staples in the Philippines and Thailand and the healthy food category on a global scale. Monde Nissin’s financial track record shows it has been able to combine modest top-line growth with improving margins and cash generation. Overall, we believe that Monde Nissin’s fundamentals are attractive.

Monde Nissin IPO Initiation: Instant Karma

Greggs’ Q320 trading update shows a recovery in sales in line with our expectations. There has been good progress: getting all infrastructure up and running, and adapting to the new environment, both in store (including the Click and Collect service) and in generating strong incremental sales from the new Delivery offer. We retain our existing forecasts. The uncertainty about the recovery in sales leaves the EV/sales multiple for FY21e of 1.1x lower than recent multiples.

Greggs’ Q320 trading update shows a recovery in sales in line with our expectations. There has been good progress: getting all infrastructure up and running, and adapting to the new environment, both in store (including the Click and Collect service) and in generating strong incremental sales from the new Delivery offer. We retain our existing forecasts. The uncertainty about the recovery in sales leaves the EV/sales multiple for FY21e of 1.1x lower than recent multiples.

Greggs’ interim results were heavily affected by the estate closure for the majority of Q220, due to COVID-19. The key takeaways are that operating cash burn during lockdown was in line with management expectations, and current trading, albeit with limited data, indicates gradual weekly progress in revenue, described by management as encouraging. We assume recovery through H121e, before stabilising at a revenue run-rate equivalent to 90% of the level in FY19. The resulting EV/sales multiple of 1.2x for FY21e, is in line with recent multiples. It reflects lower estimated revenue in that year and uncertainty about the rate of recovery.

Greggs’ interim results were heavily affected by the estate closure for the majority of Q220, due to COVID-19. The key takeaways are that operating cash burn during lockdown was in line with management expectations, and current trading, albeit with limited data, indicates gradual weekly progress in revenue, described by management as encouraging. We assume recovery through H121e, before stabilising at a revenue run-rate equivalent to 90% of the level in FY19. The resulting EV/sales multiple of 1.2x for FY21e, is in line with recent multiples. It reflects lower estimated revenue in that year and uncertainty about the rate of recovery.


United Kingdom

Greggs plc is a prominent British bakery and fast food chain specializing in 'on-the-go' savoury products like sausage rolls, sandwiches, and pastries, as well as sweet items such as doughnuts and vanilla slices. The company operates over 2,600 shops nationwide and provides breakfast options, drinks, snacks, and salads. Greggs is headquartered in Newcastle upon Tyne, England, and was founded in 1939.

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Greggs (GRG LN)

Greggs - Rate of recovery continues to surprise

Greggs’ Q221 trading has surprised on the upside, with positive two-year like-for-like (lfl) sales growth continuing through the end of the period,...

Edison Investment Research

Greggs - Recovering better than expected

Gregg’s trading update indicates a strong rebound in trading since the re-opening of non-essential retail in April 2021, with positive...

Edison Investment Research

Monde Nissin IPO Initiation: Instant Karma

Monde Nissin will launch pre-marketing for an IPO to raise up to PHP63 billion ($1.3 billion) in April, according to press reports. Overall, we...

Arun George

Greggs - Learning to manage

Greggs’ Q320 trading update shows a recovery in sales in line with our expectations. There has been good progress: getting all infrastructure up...

Edison Investment Research

Greggs - Gradual recovery expected

Greggs’ interim results were heavily affected by the estate closure for the majority of Q220, due to COVID-19. The key takeaways are that operating...

Edison Investment Research

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