AUS
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Highlights
- Projected NPAT Decline: Citi forecasts Metcash’s 1H25 NPAT at AU$134 million, down 5% year-over-year.
- Sector Challenges: Declining trends in hardware and liquor markets, along with slowing price growth, weigh on revenues.
- Stock Outlook: Citi retains a "Neutral" rating with a target price of AU$3.40; Metcash shares are down 10.6% YTD.
Australian supermarket wholesaler Metcash Ltd (ASX:MTS) is expected to report a 5% decline in net profit after tax (NPAT) for the first half of FY25, according to analysts at Citi. The brokerage forecasts NPAT of AU$134 million (USD $87 million), aligning with the company’s guidance range of AU$132–AU$135 million. Metcash is scheduled to release its earnings on Monday, 2 December 2024.
Declining Market Trends Weigh on Growth
Citi attributes the expected decline to adverse trends in the hardware and liquor markets. Slowing price growth in supermarket and hardware categories has created significant headwinds for revenue, adding to the pressure.
“The hardware and liquor markets are showing declining trends. Moreover, price growth continues to fall in supermarket and hardware categories, creating a significant headwind for revenue growth,” the brokerage noted in its analysis.
Additionally, weak liquor volumes reflect broader consumer challenges, including budgetary constraints and a heightened focus on health.
Analyst Sentiment and Ratings
Despite the challenging outlook, Metcash retains mixed support from analysts. According to LSEG data, six out of 12 analysts rate the stock as "buy" or higher, five suggest a "hold," and one advises a "sell." The median price target is AU$3.65, slightly above Citi’s "Neutral" stance with a target price of AU$3.40.
The company’s stock has faced a tough 2024, declining 10.6% year-to-date as of its last close.
Citi's Position
Citi has maintained its "Neutral" rating on Metcash shares, citing ongoing market challenges as a barrier to growth. However, the firm’s alignment with the company’s NPAT guidance indicates confidence in management’s ability to navigate near-term pressures.
