达能：弥合盈利拐点

Restricted - External DANO.PA/BN FPOVERWEIGHTUnchangedEuropean ConsumerStaplesNEUTRALUnchangedPrice TargetEUR 85.00raised 4% from EUR 82.00Price (03-Jun-25)EUR 74.68Potential Upside/Downside+13.8%Source: Bloomberg, Barclays ResearchMarket Cap (EUR mn)50862Shares Outstanding (mn)681.07Free Float (%)94.7352 Wk Avg Daily Volume (mn)1.3Dividend Yield (%)2.88Return on Equity TTM (%)11.90Current BVPS (EUR)27.62Source: BloombergPrice PerformanceExchange-PA52 Week rangeEUR 77.18-56.14Source: IDCLink to Barclays Live for interactive chartingEuropean Consumer StaplesWarren Ackerman+44 (0)20 3134 1903warren.ackerman@barclays.comBarclays, UKAlex Sloane+44 (0)20 3555 0645alexander.sloane@barclays.comBarclays, UK A number of the key milestones have been achieved since Antoine first set out the RenewDanone strategy in early 2022.•Fixing or divesting 25% of the portfolio that was underperforming including exiting €1bn ofcommodity milk sales•Significantly stepping up reinvestment – up 300bps between 2022 and 2024•Moving R&D back into the centre of the business, which has allowed Danone to drive a multiyear innovation funnel•Pivoting portfolio to Medical Nutrition and taking full advantage of the Chinese Medicalopportunity•Stepping up FCF to €3bn per annum•Improving volume performance in EDP in both US and Europe and developing its Proteinofferwhich has resulted in a doubling of its high protein EDP sales•Leveraging the out of home opportunity across Danone – cafes, hospitals, sports,coffeeshops•Fixing Danone's supply chain and transitioning it to one of the best supply chains in GlobalFMCG.Another proof point, which although not financial, is that an FMCG world leader, Colgate, hasrecently appointed Danone's Co-CEO Shane Grant to become Colgate's COO for the Americasregion. He is possibly now one of the favourites to become group CEO of Colgate when NoelWallace retires. This is not a slight on Danone, but more a compliment for what he has done toturn around Danone and how highly considered Danone executives are perceived.Big cap USFMCG companies fishing for top executives at Danone even five years ago would have beenalmost unthinkable.However, clearly the work is never done, especially in a very volatile macro whereconsumers and channels are moving more quickly than they ever have in the past.Danonestill has to turn around its UScoffeecreamers position, fix its Silk plant based in the US and do abetter market share job in US EDP ex its high protein ranges.However, for us, there are still two big proof points that Danone need to deliver from here1.Delivering decent volume growth as comps get more challenging from Q2 onwards.Danone face a 2.9% volume comp in Q2-25, 3.6% in Q3-25 and 4.2% in Q4-25.2.Turning the good work on the portfolio and the top line to the bottom line. In simpleterms we have had the FCF inflection, the next step needs to be an EPS inflection.If Danone is able to deliver both of these, we think it is well on its way to becoming a valuecompounder in staples.For us what this means is delivering not only 4% OSG consistentlybut also at the same time translating this to high single digit EPS growth.If it can do this,we still see room for the multiple to move higher, but it's increasingly clear to us it needs moreearnings growth to drive the share price from here. The reason this is important is becausewhen one looks at Danone's share price vs its earnings estimate, it shows a very clear picture,which is its share price performance has been almost entirely driven by re-rating. 2 FIGURE 3. Danone's PE has climbed from 13x PE at the start of the turnaround in early 22 to >19x PE todayJun-22Aug-22Oct-22Dec-22Feb-23Apr-23Jun-23Aug-23Oct-23Dec-23Feb-24Apr-24Jun-24Aug-24Oct-24Dec-24Feb-25Apr-25New CEO took overDanone Forward PEDanone Average Forward PEContinuing to re-rate in our view gets tougher from here when one considers that Danone's PEmultiple has climbed from 13x PE in the summer of 2022 to >19x PE today. The long-standingDanone discount to peers is no longer the case.Despite the macro challenges we believe that 2025 will be the year in which Danonedemonstrates real EPS outperformance vs peers. There are a number of reasons thatsupport our view.•Reinvestment should start to plateau: Over the last three years, Danone has increasedreinvestment by 300bps with a 170bp increase in 2024 alone. We now expect this to plateau.Danone have closed the obvious underinvestment when CEO Antoine de SaintAffriquebecame CEO. Spend will move more towards driving category leadership, which we view tomean it will still rise but it will not need to gap higher as it has in the last three years. Wherethere are opportunities to drive significant growth, Danone will continue to spend behind it. Agood example is the entry into shelf-stable protein shakes in the US, which is a $7bn marketopportunity growing 20% and where Danone has a good brand in Oikos but will be going 3 FIGURE 4. Danone's General & Administrative Expenses (as %