Orora Limited

ORA Details

Orora Limited (ASX: ORA) is involved in manufacturing as well as distribution of tailored packaging, products and visual communication solutions to customers globally.

Healthy Performance in FY21 (For the Year Ended 30 June 2021)

• It has recorded an 0.8% YoY decline in its sales revenue to $3,538 million. On a constant currency basis, the group’s sales revenue rose 7.8%.
• The underlying EBIT grew by 17.3% on a constant currency basis, and the reported underlying EBIT rose 11.6% YoY to $249.1 million.
• ORA’s underlying earnings per share (EPS) stood at 16.9 cents, with robust EPS growth of 29.0% driven by the rise in underlying NPAT (before significant items) as well as the impact of the on-market buyback, with 89.3 Mn shares having been purchased during FY 2021.

Source: Analysis by Kalkine Group

Key Risks

The group is exposed to the risk of major changes in the global macro-economic environment.  Continued deterioration in the economy may affect the value chain or industries that could have an adverse impact on its operational and financial performance. Further, it is prone to competitive risk as it operates in highly competitive markets.

Outlook

The company estimates its FY22 EBIT for Australasia to remain largely in line with FY21 as the benefits of sustained strength in the Cans business are likely to outweigh the effect of subdued glass volumes.

In North America, progress made on the implementation of the core strategic initiatives as well as the OPS, and OV profit improvement programs are anticipated to continue.

Additionally, the company remains hopeful of the positive momentum to sustain into FY22, and resultantly, it is estimating additional growth in the underlying earnings of the group.

Valuation Methodology: Price/EPS Based Relative Valuation (Illustrative)

Technical Overview

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation                               

The stock has been valued using a Price/EPS multiple-based illustrative relative valuation and the target price so arrived reflects a decline of low double-digit (in % terms). A slight discount has been applied to Price/EPS Multiple (NTM) (Peer Average) considering the continuing impacts of the COVID-19 pandemic as well as uncertain global and domestic economic conditions.

Considering the aforementioned factors and the associated business risks, we advise the investors to liquidate the stock.

Thus, we give a “Sell” rating on the stock at the current market price of $3.535 per share, as on 14th January 2022.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: The stock is a part of the Global Big Money Report