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Is Synlait Milk going to fly higher?

Team Veye | 19 Apr 2018 ASX - SM1
Is Synlait Milk going to fly higher?

Synlait Milk Ltd (ASX:SM1)

The company published its H1 FY2018 results on 21st Mar’18 highlighting a strong performance across key metrics. The Group announced a record half-year Net Profit after Tax (NPAT) of $40.7m up 284%.

(Graphic Source – Company Reports)

The Group’s CEO highlighted that the strong earnings growth of $30.1million has been driven by increases in manufacture and sales of their highest margin products, as well as improved margins and earlier sales of their ingredients products. The company stated that their relationship with The A2 Milk Company continues to strengthen where they remain their exclusive manufacturer for the important Australia, New Zealand and China market. In the six months to 31st Jan’18, Synlait has invested $34.5 million in capital expenditure throughout New Zealand. The major components of this were the Synlait Auckland blending and canning facility ($11.2 million) the new wetmix kitchen at Synlait Dunsandel ($18.4 million). Synlait also established a new research and development centre in Palmerston North. Synlait’s cash flow generation of $204.3 million for the 12 months ended 31st Jan’18 has fully funded the capital expenditure program and has enabled the reduction of debt to low levels. Total Net Debt for H1 FY18 was $49.7 million, a substantial reduction from $147 million at the same time in FY17. On 5th Apr’18, the company announced that it’s going to double its Lactoferrin Capacity following new Supply agreement that will underwrite an investment of approximately $18m (Data Source – Company Reports).

 

Financials

The company’s EPS stands at 40.67 and EBITD margin at 14.24. The Debt-to-Equity ratio is 31.88 against a sector average of 41.92. The group has a P/E ratio of 24.87 against the sector average of 41.90. The stock has a Market cap of 1.61bn & a Share Volume of 179.22m. The stock price of the company has grown 40% during the last 3.5 months and is currently at an all-time high of $9.17 on the back of strong results and robust growth & expansion strategy and still has a lot of upside potential (Data Source – Reuters.com).

 

Veye’s Take    

We give a “Buy” to “Synlait Milk Ltd” at the current price of $9.17

Disclaimer

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