Hain Celestial started at buy by Deutsche Bank

Deutsche Bank initiates coverage on Hain Celestial (NASDAQ: HAIN) with a Buy rating and a price target of $33.00.

Analyst Rob Dickerson commented, “We’re initiating coverage of Hain Celestial Group (HAIN), a global producer of natural and organic food and personal care products, with a Buy rating and $33 price target, or 22% upside potential over the next 12 months. Although the natural/organic food and personal care space has watched revenue growth decelerate in the U.S. since 2015 and competition continues to ramp for products with healthier attributes, we see such deceleration stabilizing, while still remaining materially ahead of traditional packaged food growth and a net positive for Hain. Our category, brand, SKU, and manufacturing facility optimization analysis points to margin upside potential at least in line with the company’s FY’20 $350mm gross savings target and a more concrete path to a stronger margin profile. Further reductions to complexity should increase management’s strategic optionality, with the decision to divest the protein business being an important first step. Our base case assumes $250mm in share repurchases with special dividend cash allocation potential, driven by the expected divestment of H.P.P., increased brand reinvestment, and modest margin improvement through FY’20. Additionally, given the company’s strategic optionality, we ran three different scenarios for potential further brand and asset divestments – all scenarios analyzed suggest higher potential shareholder returns than our base case. Overall, we find the risk/reward on the shares attractive given the company’s underlevered balance sheet, excess cash generation potential, strategic optionality, and current valuation.”

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