Price increases implemented during the course of H117 have been successful and organic sales growth of 4.8% is impressive. This leads us to raise our revenue forecasts for Centrale del Latte Di Italia SpA (MI:CLII) by 2% and our profit forecasts rise by 5-11%. Management expects the recovery to continue into Q317 and beyond as the full effect of the price increases comes through. Our fair value rises to €2.94 (from €2.82).
Price increases drive top-line growth
Price increases were implemented on 1 April in order to offset some cost inflation, but they were fully rolled out on 1 June. In addition spot milk prices have started to fall, so the backdrop for H217 is far more benign. We continue to forecast an EBITDA margin of 4.8% for FY17 vs 2.7% in H117, hence implying 7.0% margin during the balance of 2017, which should be achievable given the price increases that have been put through.
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