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Recommendation
Monde Nissin Corp. (MONDE) appears to have bounced back well from the product recall of their instant noodles in May 2022, however, there is still no clear visibility of what will be the next growth driver for the company, which makes us uncomfortable about its premium valuation of 27x Price-Earnings (P/E) ratio over URC which is currently trading at a lower 23x 2023 P/E and CNPF’s 15.4x 2023 P/E.
After a year of volatile trading, the share price is now settling down at the Php11/share level. Valuation-wise, the application of the Php7.15 Billion deficit against MONDE’s equity equates to around Php11.20/share, practically aligning with the market price of the stock.
While this leaves a bad taste in the mouth for the investors who bought into the growth of the company early on, the early recognition of the unprofitable investment allows MONDE to give both new and old investors a fresh start.
Watch the Php11.00 level, which is serving like an adjusted IPO price, albeit with no compelling growth story, except for easing cost pressures.
Analysis
Despite MONDE’s topline for 2022 reaching P73.9 billion, up 6.7% year-on-year (YoY), core net income declined to P6.6 billion (-19.6%) due to elevated raw materials, energy and logistics costs. In 4Q 2022, MONDE impaired Php20.5 Billion worth of intangible assets related to its Meat Alternatives (MA) business (Quorn). This led to a huge net loss of Php13 Billion for 2022.
Net sales from the Company’s Asia – Pacific Branded Food and Beverage Business (APAC BFB) reached P58.6 billion (+8.4%) in 2022, driven by price increases in all categories and strong volume growth in biscuit and beverage sales. Quorn foods net sales also reached P15.3 billion (+1.0%) due to price increases. MONDE’s net income was way behind FY2022 consensus estimates of P7.42 billion.
MONDE, we believe, will quickly swallow the losses. It recently announced the recognition of the Php7.15 Billion deficit related to the impairment of its MA business. This will be taken from the Php46.5 Billion in additional paid-in capital which the company raised during its IPO in 2021.
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