Metcash Ltd (MTS.AX): FY26 First Take: Trading update a mixed bag

Research evidence excerpt

Metcash Ltd (MTS.AX): FY26 First Take: Trading update a mixed bag

Metcash Ltd (MTS.AX)

22 June 2026 Citi Research

Metcash Ltd

Valuation

We have an average spot valuation for MTS of $2.75 per share. Our 12-month target price is $2.80 per share. Our target price is

derived by rolling forward our valuation at the cost of equity of 11%.

We calculate our valuation as the average of our DCF valuation of $3.09 per share, PE relative valuation of $2.19 per share, and

our sum-of-the-parts valuation of $2.95 per share.

Using a PE relative measure, we value MTS at a 50% discount to the ASX 200 Industrials, reflecting MTS’s historical discount

to the market and the further potential for contract losses.

Our DCF valuation is derived using an equity beta of 1.0 and a WACC of 10%. We use a risk free rate of 4%. We use a terminal

growth rate of 3.5%.

Our sum-of-the-parts valuation is derived comparing MTS to international peers. We apply a discount to the median of

international peers in supermarkets given the competitive risks the company faces and the soft growth outlook. Our fair value

EV/EBIT multiple is 7.5x FY27e.

Risks

Downside risks to achieving our target price include:

• A price war in supermarket retailing. Future margin growth relies on a rational supermarket industry.

• Lower food inflation. MTS’s business model generates revenue based on the nominal value of orders. If food inflation subsides,

MTS revenue will come under pressure.

• Rapid industry-wide supermarket store rollout in Australia. The rapid store rollout by the major chains is likely to dilute the

returns for all supermarket operators.

• High petrol prices. High petrol prices hurt convenience store sales as price-conscious consumers avoid paying the premium

for convenience.