Danone: Oddo confirms rating and TP
(CercleFinance.com) - Danone made several announcements this morning, including a plan to reduce costs by 1 billion euros by 2023 (300 million euros in COGS and 700 million euros in central costs), with a 25% reduction in headcount at the group's head offices worldwide (1,500 to 2,000 redundancies).
Following this announcement, Oddo confirms its reduce rating on the stock with a target price of 50 euros (current price: 51.8 euros, down 1.5%).
Oddo says that the emphasis on operating profitability is the most striking point of the group's statement, as opposed to the emphasis on the growth target.
Oddo also believes that the division of Danone International into 5 zones is a good thing.
However, the return to a hyper-local organisation leads us to think that Danone could return to the Country Business Units model that prevailed under Franck Riboud's leadership. Although this very decentralised organisation mode was a factor of agility and growth, it was not conducive to operational control, which was of minor importance since the progression of the group's operating margin was essentially derived from operational leverage, the analyst says.
The question is therefore to know to what extent this local organisation is consistent with the margin targets. Finally, the press release does not refer to the LT targets provided in February 2020, Oddo adds.
The market seems to agree - the Danone share is down almost 1.5% in mid-morning trading on Monday.
Copyright (c) 2020 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
Following this announcement, Oddo confirms its reduce rating on the stock with a target price of 50 euros (current price: 51.8 euros, down 1.5%).
Oddo says that the emphasis on operating profitability is the most striking point of the group's statement, as opposed to the emphasis on the growth target.
Oddo also believes that the division of Danone International into 5 zones is a good thing.
However, the return to a hyper-local organisation leads us to think that Danone could return to the Country Business Units model that prevailed under Franck Riboud's leadership. Although this very decentralised organisation mode was a factor of agility and growth, it was not conducive to operational control, which was of minor importance since the progression of the group's operating margin was essentially derived from operational leverage, the analyst says.
The question is therefore to know to what extent this local organisation is consistent with the margin targets. Finally, the press release does not refer to the LT targets provided in February 2020, Oddo adds.
The market seems to agree - the Danone share is down almost 1.5% in mid-morning trading on Monday.
Copyright (c) 2020 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.