DAVY VIEW

A sharp de-rating since late 2021 has lowered ingredient sector valuations back to 2017-18 levels. The journey in valuation discovery continues to be influenced by the direction of the risk-free rate. Cost headwinds, notably energy, persist — as such, pricing assumptions are likely to be revised upwards through 2023. Model resilience was a notable feature through the 2009-2010 financial crisis, with consistent organic revenue growth delivery. Volumetric drivers, such as food/beverage renovation and sustainably-led innovation agendas, provide a structural tailwind and defensive attributes – with best-in-class supply chains reaping volume dividends. We side with business models with proven cost-recovery transmission mechanisms and earnings momentum. Our top picks are Symrise and Kerry Group. In this report, we launch our new Ingredients Handbook (72 slides) — click here to download. Q3 results are now a critical watchpoint.