johnsone/initiation · Datasets at Hugging Face

text stringlengths 1 711
North America Equity Research
29 May 2023
J PMORGAN
www.jpmorganmarkets.com
Kenvue
􀋘No More Tears􀋙 as Separation from Parent to
Accelerate Growth, FCF, Dividends; Initiate with OW Initiation
Overweight
KVUE, KVUE US
Price (26 May 23):$26.30
Price Target (Dec-23):$29.00
Beverage, Household & Personal
Care Products
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Bloomberg JPMA TEIXEIRA <GO>
Drew Levine, CFA
(1-212) 622-0374
drew.levine@jpmorgan.com
Shovana Chowdhury
(1-212) 270-2184
shovana.chowdhury@jpmorgan.com
J.P. Morgan Securities LLC
Quarterly Forecasts (FYE Dec)
Adj. EBITDA ($ mn)
2022A 2023E 2024E
Q1 800 867A 968
Q2 1,022 940 1,000
Q3 971 1,007 1,014
Q4 812 983 1,001
FY 3,606 3,797 3,983
Style Exposure
We are initiating coverage of Kenvue (NYSE ticker: KVUE) with an OW rating
and a Dec 2023 price target of $29 (70/30 mix of peer multiples and DCF). As the largest pure-play consumer health company in the world following its separation
from parent Johnson & Johnson (N-rated by Chris Schott), we view KVUE as
uniquely positioned to benefit from consumer mega trends (self-care, aging). We expect KVUE to deliver resilient growth ahead in large addressable markets (TAM
~ $369bn) with iconic brands that form strong consumer connections from birth in
a portfolio spanning cold, flu, pain, allergy, and smoke cessation OTC medicines,
skincare, mouthwash, baby care, and wound care, among others. As a stand-alone company, we believe Kenvue board and management will be more focused and
accountable for the growth and profitability of the business following the separation that began in 2019, with significant opportunities to scale in many
adjacencies and markets around the world organically and through tuck-in M&A (would be incremental to our estimates and not needed to meet algorithm).
• Large Categories That Benefit from Wellness Tailwinds and Sustainable Growth Momentum, Even after Lapping COVID Tailwinds. With 10
iconic brands with sales greater than $400M (Neutrogena, Listerine, Tylenol,
Johnson􀋖s Baby, Aveeno, Nicorette, Zyrtec, Band-Aid, Stayfree/Carefree,
OGX) as well as over 37 regional brands, KVUE is poised to offer investors at least ~4-5% three-year CAGR in organic sales (OSG) , in line with top peers.
We note that due to supply chain constraints and SKU rationalization, KVUE lost share with OSG 3Y CAGR of+3.4% while the broader categories grew
+4.8%. KVUE still holds solid market shares in key categories and markets,
and like OW-rated PG, KVUE is still US-centric, which provides room to
regain share and 􀋘lift and shift􀋙 some of the most iconic brands abroad.
• Further Margin Expansion Opportunity. KVUE already delivered
impressive +200/250 bps GM/EBITDA expansions vs. 2019, outperforming
peers and despite cost and supply chain challenges. But we still see see KVUE generating profit growth ahead of sales growth from 2023-2025 with a three-
year CAGR of +6.1% vs. top-line CAGR of +4.3%, implying EBITDA margin
expansion to 25.4% in 2025 from 24.1% in 2022 (roughly +130 bps expansion)
and 25.3% in 2021.
• Attractive Valuation & Dividend Yield for Best-in-Class Growth
Compounder. We believe KVUE offers upside to investors at current levels
even after rallying from IPO price of $22 on May 3. At our $29 Dec 2023 price target, KVUE will be valued at ~16x EV/EBITDA 24E, which is
approximately where OW-rated CL trades currently for 2023E (still ~2x
cheaper than PG). As KVUE builds its track record as a public company (if our
estimates for solid quarters ahead materialize) and post-potential distribution
of shares that JNJ owns to current JNJ shareholders, we believe KVUE should
trade with the major-league high-quality multinationals that have defensive sales, compounding growth, and solid free cash flow conversion.
See page 92 for analyst certification and important disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
Sources for: Style Exposure – J.P. Morgan Quantitative and Derivatives Strategy; all other tables are company data and J.P. Morgan estimates.
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
2
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
North America Equity Research
29 May 2023 J PMORGAN
Price Performance
YTD 1m 3m 12m
Abs - - - -
Rel - - - -
Company Data
Shares O/S (mn) 1,935
52-week range ($) 27.80-25.25
Market cap ($ mn) 50,893.83
Exchange rate 1.00
Free float(%) 10.4%
3M - Avg daily vol (mn) -
3M - Avg daily val ($ mn) -
Volatility (90 Day) -
Index S&P 500
BBG BUY\|HOLD\|SELL -
Key Metrics (FYE Dec)
$ in millions FY22A FY23E FY24E FY25E
Financial Estimates
Revenue 14,950 15,662 16,289 16,973
Adj. EBITDA 3,606 3,797 3,983 4,308
Adj. EBIT 3,310 3,487 3,648 3,957
Adj. net income 2,589 2,404 2,451 2,693
Adj. EPS 1.34 1.24 1.27 1.39
BBG EPS - - - -

North America Equity Research

29 May 2023

J PMORGAN

www.jpmorganmarkets.com

Kenvue

􀋘No More Tears􀋙 as Separation from Parent to

Accelerate Growth, FCF, Dividends; Initiate with OW Initiation

Overweight

KVUE, KVUE US

Price (26 May 23):$26.30

Price Target (Dec-23):$29.00

Beverage, Household & Personal

Care Products

Andrea Teixeira, CFA AC

(1-212) 622-6735

andrea.f.teixeira@jpmorgan.com

Bloomberg JPMA TEIXEIRA <GO>

Drew Levine, CFA

(1-212) 622-0374

drew.levine@jpmorgan.com

Shovana Chowdhury

(1-212) 270-2184

shovana.chowdhury@jpmorgan.com

J.P. Morgan Securities LLC

Quarterly Forecasts (FYE Dec)

Adj. EBITDA ($ mn)

2022A 2023E 2024E

Q1 800 867A 968

Q2 1,022 940 1,000

Q3 971 1,007 1,014

Q4 812 983 1,001

FY 3,606 3,797 3,983

Style Exposure

We are initiating coverage of Kenvue (NYSE ticker: KVUE) with an OW rating

and a Dec 2023 price target of $29 (70/30 mix of peer multiples and DCF). As the largest pure-play consumer health company in the world following its separation

from parent Johnson & Johnson (N-rated by Chris Schott), we view KVUE as

uniquely positioned to benefit from consumer mega trends (self-care, aging). We expect KVUE to deliver resilient growth ahead in large addressable markets (TAM

~ $369bn) with iconic brands that form strong consumer connections from birth in

a portfolio spanning cold, flu, pain, allergy, and smoke cessation OTC medicines,

skincare, mouthwash, baby care, and wound care, among others. As a stand-alone company, we believe Kenvue board and management will be more focused and

accountable for the growth and profitability of the business following the separation that began in 2019, with significant opportunities to scale in many

adjacencies and markets around the world organically and through tuck-in M&A (would be incremental to our estimates and not needed to meet algorithm).

• Large Categories That Benefit from Wellness Tailwinds and Sustainable Growth Momentum, Even after Lapping COVID Tailwinds. With 10

iconic brands with sales greater than $400M (Neutrogena, Listerine, Tylenol,

Johnson􀋖s Baby, Aveeno, Nicorette, Zyrtec, Band-Aid, Stayfree/Carefree,

OGX) as well as over 37 regional brands, KVUE is poised to offer investors at least ~4-5% three-year CAGR in organic sales (OSG) , in line with top peers.

We note that due to supply chain constraints and SKU rationalization, KVUE lost share with OSG 3Y CAGR of+3.4% while the broader categories grew

+4.8%. KVUE still holds solid market shares in key categories and markets,

and like OW-rated PG, KVUE is still US-centric, which provides room to

regain share and 􀋘lift and shift􀋙 some of the most iconic brands abroad.

• Further Margin Expansion Opportunity. KVUE already delivered

impressive +200/250 bps GM/EBITDA expansions vs. 2019, outperforming

peers and despite cost and supply chain challenges. But we still see see KVUE generating profit growth ahead of sales growth from 2023-2025 with a three-

year CAGR of +6.1% vs. top-line CAGR of +4.3%, implying EBITDA margin

expansion to 25.4% in 2025 from 24.1% in 2022 (roughly +130 bps expansion)

and 25.3% in 2021.

• Attractive Valuation & Dividend Yield for Best-in-Class Growth

Compounder. We believe KVUE offers upside to investors at current levels

even after rallying from IPO price of $22 on May 3. At our $29 Dec 2023 price target, KVUE will be valued at ~16x EV/EBITDA 24E, which is

approximately where OW-rated CL trades currently for 2023E (still ~2x

cheaper than PG). As KVUE builds its track record as a public company (if our

estimates for solid quarters ahead materialize) and post-potential distribution

of shares that JNJ owns to current JNJ shareholders, we believe KVUE should

trade with the major-league high-quality multinationals that have defensive sales, compounding growth, and solid free cash flow conversion.

See page 92 for analyst certification and important disclosures.

J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that

the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single

factor in making their investment decision.

Sources for: Style Exposure – J.P. Morgan Quantitative and Derivatives Strategy; all other tables are company data and J.P. Morgan estimates.

This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.

2

Andrea Teixeira, CFA AC

(1-212) 622-6735

andrea.f.teixeira@jpmorgan.com

North America Equity Research

29 May 2023 J PMORGAN

Price Performance

YTD 1m 3m 12m

Abs - - - -

Rel - - - -

Company Data

Shares O/S (mn) 1,935

52-week range ($) 27.80-25.25

Market cap ($ mn) 50,893.83

Exchange rate 1.00

Free float(%) 10.4%

3M - Avg daily vol (mn) -

3M - Avg daily val ($ mn) -

Volatility (90 Day) -

Index S&P 500

BBG BUY|HOLD|SELL -

Key Metrics (FYE Dec)

$ in millions FY22A FY23E FY24E FY25E

Financial Estimates

Revenue 14,950 15,662 16,289 16,973

Adj. EBITDA 3,606 3,797 3,983 4,308

Adj. EBIT 3,310 3,487 3,648 3,957

Adj. net income 2,589 2,404 2,451 2,693

Adj. EPS 1.34 1.24 1.27 1.39

BBG EPS - - - -