SAP: Making their whey: SAP delivers anticipated improvements, F27 should bring more of the same

Research evidence excerpt

SAP: Making their whey: SAP delivers anticipated improvements, F27 should bring more of the same

tperform rating. earnings growth. Better utilization rates and disciplined brand

focus underpin confidence in long-term U.S. opportunity. The

Upside scenario pivot from “fixing the base” to “harnessing returns" can now

Under our upside scenario ($57), we flex: a) revenue growth to be augmented by selective deployment of FCF to high-growth

reflect price increases and faster normalization of commodity areas.

backdrop; and b) EBITDA margins to reflect traction related to:

Commodity market volatility and macro backdrop remaini) strategic initiatives; ii) accelerating innovation and market

key caveats, but SAP is well positioned strategically,presence in dairy alternatives; and iii) mix.

geographically and financially to overcome challenges, in

Downside scenario our view. SAP is actively managing pricing and surfacing

benefits from capital investments, network rationalization andOur downside earnings and multiples reflect a recession

optimization to drive improving results.scenario with modest pressure on revenue and margins and

volatility in underlying commodity prices, driving a downside

Current valuation starting to reflect confidence that Saputovalue of $38.

can deliver more predictable earnings/CF, and possibly

return to industry-leading profitability and its longer-term

track record of growth. Our Outperform rating reflects

relative defensiveness and strength of offering, improvements

in trajectory and cadence of earnings, solid balance sheet/FCF.

Risks to rating and price target

Risks to our price target and rating include potential

impact on earnings of sticky inflation-related demand shifts,

commodity price volatility, heightened inflationary pressures