Metcash Limited (MTS) - Hardwearing

November 5, 2024

Metcash was founded in 1927 and operates as a wholesale distribution and marketing company in Australia, primarily in the Food, Liquor, and Hardware segments.

It operates under a range of familiar trading names, including IGA, Foodland, Mitre 10, Home Hardware, Total Tools, Cellarbrations, IGA Liquor, and the Bottle-O.

Metcash recently provided a trading update highlighting the impacts of the weak Australian housing cycle, with Hardware trade earnings significantly below expectations. The company faces considerable operating deleverage in this division, with cost-cutting measures insufficient to offset sales and margin declines. In contrast, trading in Food and Liquor remains stable.

These weak trading conditions led the company to lower its FY25operating profit forecasts. We’ve followed suit and downgraded our profit forecasts for the current year, as well as in FY26 and FY27. Our price target also dropped from $4.10 to $4.30. Given a deeply discounted valuation, we retain a positive recommendation but acknowledge there are few positive catalysts on the horizon.

Insights that count

Discover the best opportunities to outperform the market. Our research team dig deep into the market, company and stock data to bring you insights others might overlook.

ResMed Inc. (RMD) – Diagnostic wins

ResMed manufactures sleep apnoea equipment and other respiratory devices and provides cloud-based software monitoring systems via the software as a service (SaaS) method.

Learn More

COG Financial Services (COG) – Share price better reflecting growth options

COG Financial Services provides equipment financing and broking, aggregation, insurance broking, and novated leasing activities for small to medium-sized enterprises in Australia.

Learn More

Electro Optic Systems Holdings (EOS) – A company maker

Electro Optic Systems develops and manufactures anti-drone software and systems and related laser weaponry it sells to military customers.

Learn More

Want to keep up to
date on our latest news & insights

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.