Danone-Fiche-120727-Investment-case-PLUS-A

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					DANONE                                                                                                        
                                                                                                                                                         PLUS
                                                                                                              




Country                        France                                             Market cap.                      EUR 30.6 bn
Sector                         Food & Beverages                                   Free float                       95%
Reuters code                   DANO.PA                                            Closing price                    EUR 47.54
Valoren                        487663                                             Web site                         www.danone.com
                                                                                                              




Profile 
Danone is the 5th largest food group in the world and has refocused on 3 of the
most dynamic food businesses - Dairy Products (DPs), bottled mineral water and
baby food and clinical nutrition. Danone is the world leader in these businesses and
has a diversified geographical profile (65% of sales outside Europe, of which 55% in
emerging countries) and a penetration potential which remains high.
Strengths/opportunities                                Weaknesses/risks 
      World leader in Fresh Dairy Products,               Sensitivity to changes in the price of
      no.2 in mineral water and baby food                 milk
      All categories show growth and are                  Limited risk due to differentiated
      not concentrated, except for waters                 products (R&D and strong brands)
      Significant economies of scale dis-                                                                                                                                         
      criminating marketing effect
                                                                                                                                                               DJ stoxx
                                                                                                                                                 Danone
                                                                                                                                                               F & Bev
Investment conclusions 
                                                                                                                                                    (EUR)            (EUR)
Danone’s mission is “to promote health through nutrition for the greatest number”.                                   Performance
It operates a strategy based on innovation and geographical expansion (55% of sales                                             -1M       0.4%      5.6%
in emerging countries where the dynamic is very sustained). As the only player
                                                                                                                                -3M     -12.9%     -0.8%
which is present uniquely in businesses with low penetration and with healthy con-
                                                                                                                              -12M       -8.2%     11.8%
notations, Danone plays the role of “market opener” and builds strong competitive
                                                                                                                     Change in earnings per share
positions for its long-term growth. The group is the market leader in the majority of
the countries where it is present. It claims world leadership in FDPs (6x the no. 2)                                           2011       6.9%      0.9%
and a position as the worldwide number two in mineral water and baby food (be-                                              2012e         7.2%      9.8%
hind Nestlé in both cases). Despite a more difficult economic situation in (southern)                                       2013e        11.9%     10.0%
Europe and continued, punitive commodity prices, Danone benefits from several                                        P / E (x)
drivers: integration and repositioning of Unimilk in Russia, relaunch of Oikos Greek                                           2011        16.4      18.7
yogurt in the US and rapid expansion in mineral waters and baby food in emerging                                            2012e          15.3      17.0
countries, guaranteeing excellent prospects for profitable growth.                                                          2013e          13.7      15.5
                                                                                                                     P / BV (x)
Risk 
                                                                                                                               2011         2.4       3.3
The unfavourable decisions by the EFSA concerning the group’s health benefit                                                2012e           2.2       3.0
claims could adversely impact the image of certain FDP products. The continued                                              2013e           2.1       2.8
deterioration on the European market could prevent the group from passing on                                         Dividend yield
price rises in FDPs.
                                                                                                                               2011       2.9%      2.7%
Valuation                                                                                                                   2012e         3.1%      3.0%
Since the Reset programme (relaunch of volumes and repositioning) in 2009, Da-                                              2013e         3.5%      3.3%
none has once again achieved the greatest organic growth rate in the food sector                                     Beta vs.           Sector    Market
without heeding the sirens of expensive acquisitions, which should allow it to re-                                               6M        1.14      0.65
claim and justify its historical premium over its peers of around 10%.                                                           Sources : B&Cie, Bloomberg, Datastream IBES  


Key figures
                                              2010           2011         2012e         2013e          2014e                            Sales in 2011
in EUR million
Sales                                       17 010        19 318         20 796        22 322         24 013                           Medical
Sales growth                                13.5%         13.6%           7.7%          7.3%           7.6%                             food
Ebit                                         2 498         2 729          2 957         3 212          3 496                             6%
                                                                                                                              Waters
Operating margin                            15.2%         14.7%          14.2%         14.4%          14.6%                    17%
Net profit                                   1 870         1 671          1 871         2 093          2 327
ROE                                         15.7%         13.8%          14.5%         15.2%          15.7%
EV/Sales (x)                                  2.28          1.97           1.79          1.63           1.48                                                     Dairy
Net debt / Equity                           60.6%         55.9%          44.6%         36.0%          27.8%           Baby food                                 products
Free cash flow                               1 688         1 872          2 025         2 032          2 248            19%                                       58%
Dividend per share (€)                        1.30          1.39           1.49          1.67           1.86                                                                      
Earnings per share (€)                        2.71          2.90           3.10          3.47           3.86

                                          27 July 2012 | Research Department | Christophe Laborde
                                         All information and advice is given in good faith but without legal responsibility
         16, rue de Hollande | CP 5515 | CH-1211 Geneva 11 | T. +41 58 258 00 00 | F. +41 58 258 00 40 | research@bordier.com | www.bordier.com
             GENEVA        N YO N   BERN     ZÜRICH     PARIS      LONDON       MONTEVIDEO          S I N G A P O RE T U R K S A N D C A I CO S
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