BXB: Barcelona site visit - Ready for further automation, but scale required to justify the investment

Research evidence excerpt

BXB: Barcelona site visit - Ready for further automation, but scale required to justify the investment

Brambles

Target/Upside/Downside Scenarios Investment summary

Brambles (BXB) continues to manage its business for bothBrambles

near-term uncertainty and delivering long-term structural

30 125 Weeks 24JAN24 - 16JUN26 improvement. The last five years have seen a major

28 TARGETTARGET 27.0027.00 restructure of the operating model, gross margins were

24 insulated, and operating leverage was added through process

22 efficiency investment and fixed-cost reductions. Cash flow

20 conversion has also improved given the increased focus on

18 CURRENTCURRENT 18.7118.71

16 asset utilisation and capital efficiency. Underpinned by a

14 further program of digital and supply chain investment, we

12 expect sales and earnings growth to continue.

60m

40m

20m Risks to rating and price target

2024 2025 2026

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J Regional economic growth. Demand for pallets is tied to

BXB AU Rel. AUSTRALIAN ALL ORDINAIRES MA 40 weeks the movement of consumer staples, which is underpinned by

Source: Bloomberg and RBC Capital Markets estimates for Target that region’s economic growth. Any slowdown in consumer

Valuation demand will reduce the demand for pallets.

Our 12-month price target of A$27/share employs a

Market share loss. BXB operates within highly competitive50% short-term (fwd-SOTP) and 50% long-term (fwd-NPV)

markets; any loss of share to competitors has the effect ofvaluation mix, rounded up to the nearest 25c. Our fwd-SOTP

slowing volume growth and can cause the pool to becomevaluation of A$26.64/share applies 1yr forward peer average

unbalanced. We highlight that the shift by Costco to a plasticmultiples to our 2yr EBIT forecasts by division.