Glanbia: Guidance Increased Again, Driven by the Performance Nutrition Segment

We increase our fair value estimate for no-moat Glanbia by 9% to EUR 14.2 following a solid third-quarter trading update and a full-year guidance upgrade. Management now expects to deliver 2023 adjusted EPS growth in the range of 17% to 20% from a range of 12% to 15% previously. We are also increasing our midterm EBITA target to 7.5% from 7.0% previously as we have seen margin recovery in the performance nutrition and nutritional solutions ahead of our prior expectations. We believe Glanbia will be able to hold on to some of these gains at the group level, although we expect that the 14% to 14.5% EBITA margin expected for 2023 for the performance nutrition segment will be difficult to maintain going forward given pressure from increasing customer acquisition costs, especially for the ailing SlimFast brand. We are also updating our valuation model to reflect the recent change in reporting currency from EUR to USD. Shares were up around 7% at the time of writing following the guidance upgrade and the sequential improvement in volumes in the third quarter (from negative 4.1% for the first half to negative 2.5% for the first nine months). We believe shares are fairly valued at current levels.