Risk Reward Update

Research evidence excerpt

Risk Reward Update

UpdateM

RiskRisk RewardReward– Metcash- MetcashLtd (MTS.AX)Ltd (MTS.AX)

Challenging Conditions in Hardware Cap Outperformance

PRICE TARGET A$3.30 EQUAL-WEIGHT THESIS

operating conditions inAverage of DCF valuation (A$3.80, WACC 8.9%, terminal growth rate 3%) and P/E relative ▪Challenging

valuation (A$2.90, 12x NTM, set at half-way between mid-cycle and -1Std, which we view as Hardware are the key constraint on

appropriate given increased competitive pressures in Grocery, Liquor and Hardware and a outperformance. Weak housing activity, cost

delayed recovery in hardware category spend. inflation and poor earnings visibility are

compressing margins across the division. A A$3.45

cyclical recovery in the building cycle should

Consensus Price Target Distribution A$2.80 A$3.90 deliver operating leverage over time, but the

MS PT

timing & pace of margin rebuild remainSource: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates

uncertain.

▪Food & Liquor provide a stable earnings

base, but competitive pressures continue to

RISK REWARD CHART build. Investment from majors in supply

chain, convenience and eCommerce

pressures the independent channel over the

AUD

A$4.25A$4.25(+33.65%)A$4.25(+33.65%)(+33.65%) longer term, limiting scope for meaningful

earnings upside outside of Hardware.

see limited catalyst for a re-rate until 4 ▪We

Hardware margins stabilise.

A$3.18A$3.18A$3.18 A$3.30A$3.30(+3.77%)A$3.30(+3.77%)(+3.77%)

3 Consensus Rating Distribution

A$2.60A$2.60(-18.24%)A$2.60(-18.24%)(-18.24%) 64% Overweight

2 27% Equal-weight

9% Underweight

1 MS Rating

Source: Refinitiv, Morgan Stanley Research

JUN '25 DEC '25 JUN '26 JUN '27 Risk Reward Themes

Key: Historical Stock Performance Current Stock Price Price Target Self-help: Positive