Amcor Plc (AMC.AX): Data Update: Updating EUR:USD estimates

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Amcor Plc (AMC.AX): Data Update: Updating EUR:USD estimates

Goldman Sachs Amcor Plc (AMC.AX)

Investment Thesis - AMC.AX

AMC’s demand backdrop remains challenging, with end-applications for Rigid plastics

particularly tough. While other (non-beverage) FMCG categories are showing tentative

signs of stabilization, customer commentary continued to highlight an uncertain

demand backdrop. That said, AMC’s MT growth algorithm is underpinned by synergy

extraction following the recent Berry Global acquisition. AMC is targeting US$650m in

total synergies over 3Y (US$530m cost synergies, ~5.5% of Berry’s sales vs 4.4% of

target sales average observed in other assessed plastic packaging M&A transactions).

The combined group should drive significant savings, and we note AMC’s strong track

record. That said, we assume cost synergies at ~5% of target sales in our base case, with

our total synergy estimate ~83% of AMC’s stated synergy target. We forecast a 3yr EPS

CAGR of 9%pa to FY28e (EBIT up 23%pa). Whilst this includes an annualization of Berry,

we expect underlying organic growth and assumed synergies to drive ~13%pa growth

(~30% organic/~70% synergies). AMC is currently trading at NTM EV/EBIT of 11.8x, ~7%

discount to its 5Y average of 12.8x. In our view, this reflects a challenged demand

backdrop but discounts the significant growth underpinned by anticipated synergy

realisation. We are Buy-rated.

Price Target Risks and Methodology - Amcor

We are Buy-rated on AMC. Our 12-month target price of A$81.40 is based on an

equally-weighted blend of: 1) a DCF valuation, which values AMC at A$87.30/share; and

2) an NTM EV/EBIT, which values AMC at A$75.50/share. We believe our valuation

methodology appropriately accounts for near-term earnings (via NTM EV/EBIT applied