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Highlights
- Metcash shares rise 6.9%, reaching A$3.410, their biggest gain since June 2023.
- Citi upgrades Metcash to "Buy," with a target price increase to A$3.70.
- Analysts see continued upside, with strong food business performance exceeding expectations.
Shares of Metcash (ASX:MTS) surged by as much as 6.9% on Tuesday, reaching A$3.410, their biggest intraday gain since June 26, 2023. This rally follows the company’s positive half-year results and an upgrade from Citi, which sees continued upside for the Australian retailer. The stock hit its highest level since October 22, reflecting investor confidence after Metcash reported solid financial performance and analysts responded positively to the results.
Strong Half-Year Results
Metcash reported an underlying net profit after tax (NPAT) of A$134.6 million (approximately US$87.19 million) for the half-year period. While this result was in line with the company's guidance, it was particularly encouraging given the tough retail environment. Citi analysts highlighted that the food business demonstrated resilience, with earnings performing better than expected. Despite ongoing challenges in the retail space, Metcash’s food division maintained strong margins, which analysts believe bodes well for the company’s future prospects.
Citi's Upgrade and Analyst Sentiment
Citi raised its price target on Metcash to A$3.70 from A$3.40, upgrading the stock to "Buy" from "Neutral." The upgrade comes as the brokerage firm views Metcash’s food margin performance as particularly strong, even amidst disinflationary pressures and increasing competitive intensity within the sector. Citi’s new target price represents further upside potential for the stock.
Jefferies, another leading investment firm, echoed Citi’s positive outlook, stating that the food margin remained strong despite broader challenges in the retail sector. The firm noted that Metcash’s ability to navigate these pressures while maintaining a solid margin is a key factor in its resilience.
Analyst Ratings and Market Performance
Metcash’s strong performance on Tuesday made it the top gainer on the S&P/ASX 200 index (.AXJO), underscoring the market’s positive reaction to its half-year results and upgraded outlook. Currently, six out of 12 analysts covering Metcash rate the stock as a "Buy" or higher, with five analysts offering a "Hold" rating and one analyst recommending a "Sell." The median price target for the stock is A$3.60, according to LSEG data.
Despite the recent rally, Metcash’s shares are down 8.6% year-to-date (YTD) as of the last close. This makes the recent upward movement even more significant, signaling a potential recovery and renewed investor confidence.
