Saputo Earnings: Inflation Buoys Top-Line Growth, but We See Bumpy Road Ahead; Shares Rich

Despite no-moat Saputo's solid fiscal 2023 fourth-quarter results, shares plummeted 11%-12%, as management alluded to a murky fiscal 2024 outlook due to softer demand and an unfavorable commodity environment. Still, we don't plan a material change in our CAD 26.50 fair value estimate, and we view shares as overvalued. We've held that the market is overly optimistic about Saputo's ability to reach its fiscal 2025 target of CAD 2.125 billion adjusted EBITDA, overlooking the volatile nature of the commodity market and the firm's lack of pricing power, which underpins our no moat rating. Our fiscal 2025 adjusted EBITDA forecast sits below CAD 2 billion.