Based on the most recent Consumer Expectations Survey, food and beverage (F&B) was the category that consumers were looking to spend on the most in the coming quarter. At its current reading of 66.5, we note that this is the steepest mark that the F&B expenditure index has reached in at least the past 19 quarters dating all the way back to 2019.<\/p>\n\n\n\n
This would indicate an outsized consumption appetite for F&B products that may very well translate to added sales volumes for food manufacturers. With median 1Q 2024 inflation forecasts (based on Bloomberg) also indicating a further weakening to the 3.5% level, we therefore anticipate stronger real purchasing power for consumers in the upcoming quarter which could further fuel food sales.<\/p>\n\n\n\n
With this in mind, we are therefore partial towards listed F&B manufacturers which are expected to benefit from the potential surge in demand. For FB, we see its market leadership in several F&B categories as a strong advantage which would allow it to capture the lion\u2019s share of the post-inflation growth in its key markets. Meanwhile for URC, even with the stock\u2019s recent run-up, we note that valuations are still compellingly cheap.<\/p>\n\n\n\n
URC\u2019s current P\/E of 18.8x is already more than 2-standard deviations below its historical mean. The company\u2019s status as one of the largest FMCG names in the PH also affords it a favorable position. The same can be said for MONDE, as its F&B category also accounts for more or less 70% of company-wide revenues. Its 2024 forecasted EPS growth for the company is also projected to be one of the fastest, thereby further underpinning its favorable valuations. <\/p>\n\n\n\n
Meanwhile for DNL, which is a primary supplier for companies such as JFC and URC, its food ingredient segment accounts for over 60% of its revenues and as such, the stock would benefit greatly from higher order-fill rates from its food-centric customers.<\/p>\n\n\n\n
San Miguel Food and Beverage, Inc. (FB) – Buy, Target Price: P70.00<\/p>\n\n\n\n
Universal Robina Corporation (URC) – Buy, Target Price: P162.37<\/p>\n\n\n\n
D and L Industries, Inc. (DNL) \u2013 Buy, Target Price: 8.23<\/p>\n\n\n\n
Monde Nissin Corporation (MONDE) – Buy, Target Price:: P10.42<\/p>\n\n\n\n