Metcash: Weak Construction Activity and Declining Tobacco Sales Are Formidable Near-Term Headwinds

While no-moat Metcash’s underlying trading performance is subdued, recent acquisitions are bolstering sales growth in the first four months of fiscal 2025. Group sales are up 6% in the fiscal year to Sept. 8 compared with the previous corresponding period. We forecast sales, excluding charge-through, to increase 14% to AUD 17.3 billion in fiscal 2025, largely owing to annualized sales of AUD 1.3 billion from the Superior Food Services acquisition in June 2024. Our sales and earnings estimates are virtually unchanged and we maintain our AUD 4 fair value estimate. Shares are moderately undervalued at current prices.