half year result predictions feb 2018

Dear all,
interested to know your expectations for H1 FY2018 results.
We had upgraded guidance in December which said:
'increased revenue from 340-360mill to 360-380 mill for FY18';
' increased npat for h1 18 vs h1 17, with acceleration in earnings expected in h2 18'.

I think officially the street is expecting diluted EPS for the full year of around 9-10c (NPAT 18-20mill), which means say 4cps for H1 (or underlying NPAT around 8 mill) with guidance for 5-6cps for H2 (guidance for H2 NPAT 10-11 mill). These levels support a SP around 4.50 to 5.00 depending on your DCF assumptions and forward growth estimates.

Given the lofty valuation, however, and the recent guidance upgrade, expectations may be elevated beyond these levels. Personally, I expect H1 results to be weaker than those projected for H2 as has historically been the case, but I expect full year NPAT a lot higher than 20mill due to lower capes and economies of scale and return to previous gross margins from 2014-16 ft's of 30-40%. For example:
lets estimate revenue 375m, COGS 250m, therefore gross profit 125m (giving a 33% Gross margin), other costs 75m (up from 60m last year), EBITDA 50mill, D&A 15m, tax 5mill, giving NPAT 30mill. i.e. EPS 15c.
just a guess, but not that hard to imagine really.

i find it a fairly useless exercise to try and use DCF models to estimate valuation because EPS for fy19 and fy20 could be a lot higher depending on the china, usa and m&a outlooks combined with the success of new products such as an infant milk launch, possible entry to the A2 space, new dairy/ barista/ plant food launches, new market entries, etc.

so ill just leave it as my realistic and conservative guess for fy18 eps is 15cps, representing around 60% growth from 2016fy and to be followed by a similar rate of eps growth in 2019 to around 25cps before growth moderates in 2020, at which time eps will likely be around 35cps. these are bullish estimates, but I'm as comfortable with them as I can be given the complexity and limited transparency of FNPs operations and outlook.

suffice to say that if you agree the likely 2020 EPS is >/= 30c, the SP will re-rate within the next 12-18 months to above 6.00 which is a 20% gain plus divi's. good organic growth is becoming progressively harder to find in this ageing bull market and valuations are stretched across the board, so i remain comfortable with FNPs fairly expensive valuation.... HOLD.

interested for the numbers that others predict and what they believe the street expects.