David Hayes, an analyst from Jefferies, maintained the Sell rating on DANONE SA (0KFX – Research Report). The associated price target remains the same with €61.00.
David Hayes has given his Sell rating due to a combination of factors impacting Danone SA’s position in the Chinese infant formula market. The recent announcement by Junlebao, a significant player in the market, of a substantial maternity subsidy program adds competitive pressure on Danone to implement a similar initiative to maintain its market share. This competitive environment is further intensified by similar subsidy programs already announced by other major players like Feihe and Yili.
Implementing a comparable subsidy program could potentially strain Danone’s margins, as indicated by the estimated impact on group margins. The need to protect its market share in a highly competitive market, where Danone’s Aptamil holds a 14% share, suggests potential financial headwinds. These challenges in maintaining profitability amidst increased competition and subsidy pressures are central to Hayes’s Sell rating.