Analyst Note| Ioannis Pontikis, CFA |
Danone reported first-quarter results with like-for-like sales up 7.1% (volume/mix up 2.2% and pricing up 4.9%). Essential dairy and plant-based was up 3.6% on a like-for-like basis (plant-based growing low single-digits in Europe) while specialized nutrition and water were up 9.5% and 15.9%, respectively. Danone reiterated fiscal 2022 guidance with organic sales growth of 3%-5% (versus 4.3% in our model) and operating margin above 12% (versus our 12.4%), assuming 100% reinvestment of cost savings and a low- to mid-teens level of input cost inflation based on current macroeconomic assumptions. Longer-term, Danone expects 3%-5% organic sales growth (versus 2.8% in our model) and operating income growth higher than sales growth in the midterm (2023-24, in line with our estimates). We maintain our EUR 54 fair value estimate and narrow-moat rating for Danone.