Metcash’s Group Sales Growth Gradually Softening; Our Fair Value Estimate Is Unchanged at AUD 3.80

We maintain our AUD 3.80 fair value estimate for no-moat Metcash following first-half results and a trading update for November 2022. We continue to expect sales growth to moderate in the second half due to normalisation of consumer spending patterns, and for operating margins to decline as operating costs rise and competition intensifies. At current prices the shares screen as slightly overvalued. But on a relative value basis Metcash offers the cheapest exposure to consumer staples within our Australian retailing coverage.