We turn more positive on Food Empire (SGX:F03), and raise FY26- 27F earnings on better margins and revenue growth which, in turn, should be driven by market penetration and manufacturing capacity expansion.
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Food Empire's share price is trading at a compelling PEG of below 1, with its forward P/E below our 19% FY25-28F earnings growth CAGR.
FY25 core profit in line, but EBIT a strong outperformance.
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Revenue grew by 21% y-o-y to US$577m, led by growth in its key markets of Russia (US$191m, +35% y-o-y), South-East Asia (US$148m, +14% y-o-y), and Central Asia (US$102m, +26% y-o-y). Sales from South Asia and Europe also grew by 16% y-o-y and 8% y-o-y to US$71m and US$49m. Revenue growth from the Russia market was due to higher sales volumes, price increases, in-store promotions, a wider product range, and the appreciation of the RUB driving 21% y-o-y growth in local terms. The growth of its South-East Asia sales was contributed by Vietnam, on new products and effective marketing strategies.
Meanwhile, the Central Asia unit booked stronger sales volumes and pricing, led by Kazakhstan on strong marketing activities, as well as the full-year contribution of newly acquired Tea House, which Food Empire acquired in 2024. The South Asia and Europe segments recorded higher sales volumes and selling prices.
Full-year gross profit margin was at a strong 33.5% (beating our estimate), with the 2H25 figure reaching 34%. Food Empire chalked an EBIT of US$97m (+52% y-o-y), while its EBIT margin was at 14.4% (+1.1ppt) – both outpaced our projections. As a result, Food Empire’s pre-tax profit was better than expected, but core earnings of US$56m (+12% y-o-y) was in line on higher-than-anticipated taxes.
Raise FY26-27F earnings by 20% and 23%.
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