Orora: Initiating With a Fair Value Estimate of AUD 2.60; Screens as Undervalued

We initiate coverage on Orora with an AUD 2.60 fair value estimate. Shares are slightly undervalued. The market is less optimistic about a near-term recovery in volumes in Saverglass, its premium and ultrapremium glass segment, which is currently producing below capacity. However, we expect the premiumization of beverage containers to support profit margin growth and revenue growth above nominal gross domestic product, as the firm benefits from a mix shift with specialized glass bottle and higher-price aluminum can designs. Our Uncertainty Rating for Orora is Medium, and we assign a Standard Capital Allocation Rating.