Strong Pricing and Emerging Markets Propel JDE Peet's H1; Guidance Reaffirmed and Shares Cheap

JDE Peet's reported first-half results that included organic sales growth up 15.7%, ahead of company-compiled consensus (12.3%) and our full-year estimate (12.7% in our model), driven by price hikes at 15.9% and a stable volume/mix performance (down 0.2%), reflecting low elasticity of demand and brand strength. Management reiterated guidance for "double-digit" organic sales growth in fiscal 2022 but a "stable level of gross profit compared to last year" (about 1.5% up in our model) as well as free cash flow of over EUR 1 billion (EUR 1.07 billion in our model). Medium- to long-term targets of 3%-5% organic sales growth, mid-single-digit organic adjusted EBIT, and 70% cash conversion are unchanged. Therefore, we don't expect to change our EUR 36.50 fair value estimate materially. JDE Peet's is our top pick in European consumer packaged goods with the shares trading in 4-star territory despite being up about 10% intraday.