Orora: Plenty more to come

About the author:

Author name:

By Alex Lu

Job title:

Analyst

Date posted:

18 August 2023, 9:30 AM

Sectors Covered:

Industrials

• Orora's (ASX:ORA) FY23 result was above expectations with earnings for both Australasia and North America ahead of our forecasts.
• Key positives: Group EBIT margin +50bp to 7.5%; Balance sheet remains healthy with ND/EBITDA of 2.0x at the bottom end of management’s 2.0-2.5x target range.
• Key negatives: Revenue was softer than anticipated (-5% vs MorgansF and -4% vs Bloomberg consensus); Group ROFE fell 60bp to 21.6%.
• Management has guided to higher earnings in FY24.
• We increase FY24-26F EBIT by 5% while underlying NPAT rises by only 1-3% mainly due to higher interest costs.
• Our PE-based target price moves to (login to view) and we maintain our Add rating. Trading on 15.5x FY24F PE and 5.0% yield, we think the valuation remains attractive despite the recent strong performance in the share price.

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