Stock Pick: Kerry Group
Kerry Group is Ireland’s leading exporter in the Food and Drink sector.
The group operates in two key divisions: ingredient & flavours and consumer foods.
The ingredient & flavours division accounts for 75pc of operating profit.
Here, Kerry’s unique and successful business model is that it offers both primary ingredients and raw materials and offers functional as well as taste applications.
We believe that both organic volume growth and margin progression will be driven by secular trends such as the requirement for clean labeling, Kerry’s increasing exposure to faster growing and more profitable regions and by ultilising efficiencies from the 1 Kerry programme.
Group revenue generated from the high growth Asia Pacific region has doubled to 10pc and exposure to low growth Ireland has halved to 12pc over the last decade.
Total exposure to emerging markets is now about 19pc.
It is trading at low historical ranges on both metrics and a discount to its peer group which seems unwarranted considering Kerry’s long term target to deliver in excess of 10pc adjusted EPS growth on average per annum over the next five-year cycle.
Even this year, against the backdrop of a weak consumer and high raw material inflation, Kerry is set to deliver double digit EPS growth.
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