UBS sees European e-food sector potential despite current headwinds
** UBS expects the e-food industry's structural growth drivers to continue as it names the current headwinds facing the industry, including COVID unwind and cyclicality, as temporary
** The broker sees the industry's consumer food spending and share of mouth "at relatively nascent levels in the majority of territories"
** It initiates coverage of three online food delivery sector stocks: Delivery Hero DHER.DE, Deliveroo Plc ROO.L and HelloFresh HFGG.DE
** Netherlands' Just Eat Takeaway.com NV TKWY.AS is listed as the broker's "top pick" in the e-food industry, saying it sees a "substantially undervalued core business composed of the visibly high-quality Northern European segment," believing it to be at an inflection point towards profit growth
** The broker initiates HelloFresh, which is not included in this positive industry forecast, at "sell," naming it its "least favoured name in European eFood," that has been left exposed to a "post-COVID hangover" but with potential for long-term growth amidst rapid growth in the US
** For Delivery Hero, on the other hand, UBS sees "mostly positive momentum on key debates," and the potential for a "transformational deal" in South East Asia (Chinese e-commerce giant Meituan), despite near record-low share values and continued "raids" of its Berlin and Barcelona offices during EU antitrust investigations
** Overall, UBS sees industry-wide growth concerns post-pandemic as factored into e-food shares leading to an under appreciation of company-specific potential, like with Deliveroo's ("buy") urban profit centers
** It believes Deliveroo is capable of a buy back of a "cumulative ~30% (£615m) of current market cap over the next 5 years"
(Marleen Käsebier)
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