johnsone/initiation · Datasets at Hugging Face

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unambiguously stated, Johnson & Johnson has agreed to retain all the talc-related
liabilities and indemnify Kenvue for any and all costs – arising from litigation in the United States and Canada.􀋙 While our understanding is that there are currently only
a few active claims relating to talc outside North America, the company has not taken any reserves against these claims, and there could be additional lawsuits in the future exposing KVUE to talc-related liabilities. On April 5, JNJ proposed an $8.9
billion settlement to resolve about 60,000 talc claimants in the U.S.
• Seasonal Factors Could Impact Performance of Some OTC Products. Kenvue􀋖s
Self Care business as of 2022 represented 40% of sales and 53% of segment-level operating income and over the past three years generated 90% of KVUE􀋖s organic growth. The segment has benefitted from tailwinds to its pain relief and cold and
cough businesses from various waves of the COVID-19 pandemic and recent 􀋘triple-demic􀋙 (COVID-19, RSV, flu). Additionally, the company has exposure to
seasonal allergy trends. If upcoming cold, cough, and flu and/or allergy seasons are more mild than expected, there could be downside risk to estimates.
• Inflation and Supply Chain Volatility May Impact Cost Outlook. As with other
consumer products companies, Kenvue over the past two plus years has had to
navigate significant inflationary cost pressures and a challenging supply chain
environment. Ingredient, packaging, transportation, and labor shortages have impacted service levels, product availability, and KVUE profitability, and while the cost and supply chain environment appears to be improving, inflationary cost pressures persist and the supply chain environment could again worsen.
• Consumer Demand May Weaken in Response to Macroeconomic Environment
or Pricing Actions. While elasticities thus far have held up better than historically
in response to material pricing actions undertaken by the company beginning in
2H22, a deterioration in the macroeconomic environment or higher sensitivity to
incremental pricing actions may dent consumer demand for Kenvue􀋖s products. In a softer macroeconomic environment, consumers may choose to trade down to private label products or other lower priced branded offerings.
• Distribution of KVUE Shares by JNJ Could Put Pressure on KVUE Share Price. Following Kenvue􀋖s IPO, JNJ still owns approximately 89.6% of KVUE shares. JNJ intends to effect a tax-free distribution of KVUE shares, which would
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
7
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
North America Equity Research
29 May 2023 J P M O R G A N
entail lowering its ownership stake to below 20%. If JNJ decides to pursue a
distribution of its KVUE shares, there could be selling pressure on the stock
depending on the structure of the distribution or discount implied by a share
exchange offering.
Company Description
Kenvue Inc. (KVUE) is the largest pure-play consumer health company in the
world with a history dating back over 135 years and a presence in over 165
countries with an estimated 1.2 billion people utilizing the company􀋖s products
daily. Kenvue􀋖s portfolio includes a number of iconic brands including Tylenol,
Listerine, Band-Aid, Johnson􀋖s, Neutrogena, Aveeno, Zyrtec, and Nicorette, among
others. The company boasts 10 brands that generated over $400 million in annual
net sales in 2022, and seven of its brands hold leading positions across global
categories. All in, Kenvue generated roughly $15 billion in sales and $3.6 billion
EBITDA in 2022. The company operates three segments, Self Care (40% of 2022
sales), Skin Health & Beauty (29% of 2022 sales), and Essential Health (31% of
2022 sales), and by geographic region the company generates roughly 50% of sales
in North America, 21% of sales in Europe, the Middle East & Africa, 21% of sales
in Asia Pacific, and 8% of sales in Latin America. Kenvue owns 25 in-house
manufacturing sites in addition to seven manufacturing sites under transition
manufacturing agreements and employs more than 22,000 people globally.
Prior to its IPO on May 3, 2023, Kenvue operated as the Consumer Health
Business of Johnson & Johnson (JNJ), and following the offering JNJ holds a
roughly 89.6% stake in the company. J.P. Morgan acted as a lead book-running
manager for Kenvue􀋖s initial public offering.
Table 1: EV/EBITDA Valuation vs. Key Comps - Full Table in Valuation Section
Ticker 2023E 2024E 2023E 2024E
KVUE 15.5x 14.7x 4.8% 4.9%
HLN 14.0x 13.3x 5.0% 5.7%
PG 17.8x 16.7x 4.5% 4.7%
CL 15.8x 14.7x 4.0% 4.5%
RKT 13.4x 12.7x 5.4% 6.1%
CHD 19.4x 18.3x 3.0% 3.7%
EV/EBITDA FCF Yield
Source: Bloomberg Finance L.P and J.P. Morgan estimates.
Figure 1: Select KVUE Brands
Source: Company reports.
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
8
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
North America Equity Research
29 May 2023 J P M O R G A N
Resilient Sales Growth in Large Categories
Driven by Consumer Mega Trends
Kenvue is the largest pure-play company in the Consumer Health sector with 135+
years of history and a portfolio of iconic and trusted brands (science-backed, healthcare
professional recommendations) that many consumers are introduced to at a young age or
when they􀋖re most vulnerable (e.g., provided to you when you􀋖re not doing well by
someone that cares for you – like for a cut or an illness).
The company􀋖s portfolio is split into three segments: Self Care (40% of 2022 sales),
Skin Health & Beauty (29% of 2022 sales), and Essential Health (31% of 2022 sales).
All told, the categories in which KVUE competes represent a $369 billion market
globally that has grown at a three-year CAGR of +4.8% from 2019-2022 (or +3.5%
from 2018-2021 vs. overall CPG sector growth of around +3.1% over the same time
period).
Figure 2: KVUE 2019 Revenue Mix
Self
Care,
33.6%
Skin
Health &
Beauty,
32.2%
Essential
Health, 34.2%
2019
Source: Company reports.
Figure 3: KVUE 2022 Revenue Mix
Health &
,
Self
Care,
40.3%
Skin

unambiguously stated, Johnson & Johnson has agreed to retain all the talc-related

liabilities and indemnify Kenvue for any and all costs – arising from litigation in the United States and Canada.􀋙 While our understanding is that there are currently only

a few active claims relating to talc outside North America, the company has not taken any reserves against these claims, and there could be additional lawsuits in the future exposing KVUE to talc-related liabilities. On April 5, JNJ proposed an $8.9

billion settlement to resolve about 60,000 talc claimants in the U.S.

• Seasonal Factors Could Impact Performance of Some OTC Products. Kenvue􀋖s

Self Care business as of 2022 represented 40% of sales and 53% of segment-level operating income and over the past three years generated 90% of KVUE􀋖s organic growth. The segment has benefitted from tailwinds to its pain relief and cold and

cough businesses from various waves of the COVID-19 pandemic and recent 􀋘triple-demic􀋙 (COVID-19, RSV, flu). Additionally, the company has exposure to

seasonal allergy trends. If upcoming cold, cough, and flu and/or allergy seasons are more mild than expected, there could be downside risk to estimates.

• Inflation and Supply Chain Volatility May Impact Cost Outlook. As with other

consumer products companies, Kenvue over the past two plus years has had to

navigate significant inflationary cost pressures and a challenging supply chain

environment. Ingredient, packaging, transportation, and labor shortages have impacted service levels, product availability, and KVUE profitability, and while the cost and supply chain environment appears to be improving, inflationary cost pressures persist and the supply chain environment could again worsen.

• Consumer Demand May Weaken in Response to Macroeconomic Environment

or Pricing Actions. While elasticities thus far have held up better than historically

in response to material pricing actions undertaken by the company beginning in

2H22, a deterioration in the macroeconomic environment or higher sensitivity to

incremental pricing actions may dent consumer demand for Kenvue􀋖s products. In a softer macroeconomic environment, consumers may choose to trade down to private label products or other lower priced branded offerings.

• Distribution of KVUE Shares by JNJ Could Put Pressure on KVUE Share Price. Following Kenvue􀋖s IPO, JNJ still owns approximately 89.6% of KVUE shares. JNJ intends to effect a tax-free distribution of KVUE shares, which would

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

7

Andrea Teixeira, CFA AC

(1-212) 622-6735

andrea.f.teixeira@jpmorgan.com

North America Equity Research

29 May 2023 J P M O R G A N

entail lowering its ownership stake to below 20%. If JNJ decides to pursue a

distribution of its KVUE shares, there could be selling pressure on the stock

depending on the structure of the distribution or discount implied by a share

exchange offering.

Company Description

Kenvue Inc. (KVUE) is the largest pure-play consumer health company in the

world with a history dating back over 135 years and a presence in over 165

countries with an estimated 1.2 billion people utilizing the company􀋖s products

daily. Kenvue􀋖s portfolio includes a number of iconic brands including Tylenol,

Listerine, Band-Aid, Johnson􀋖s, Neutrogena, Aveeno, Zyrtec, and Nicorette, among

others. The company boasts 10 brands that generated over $400 million in annual

net sales in 2022, and seven of its brands hold leading positions across global

categories. All in, Kenvue generated roughly $15 billion in sales and $3.6 billion

EBITDA in 2022. The company operates three segments, Self Care (40% of 2022

sales), Skin Health & Beauty (29% of 2022 sales), and Essential Health (31% of

2022 sales), and by geographic region the company generates roughly 50% of sales

in North America, 21% of sales in Europe, the Middle East & Africa, 21% of sales

in Asia Pacific, and 8% of sales in Latin America. Kenvue owns 25 in-house

manufacturing sites in addition to seven manufacturing sites under transition

manufacturing agreements and employs more than 22,000 people globally.

Prior to its IPO on May 3, 2023, Kenvue operated as the Consumer Health

Business of Johnson & Johnson (JNJ), and following the offering JNJ holds a

roughly 89.6% stake in the company. J.P. Morgan acted as a lead book-running

manager for Kenvue􀋖s initial public offering.

Table 1: EV/EBITDA Valuation vs. Key Comps - Full Table in Valuation Section

Ticker 2023E 2024E 2023E 2024E

KVUE 15.5x 14.7x 4.8% 4.9%

HLN 14.0x 13.3x 5.0% 5.7%

PG 17.8x 16.7x 4.5% 4.7%

CL 15.8x 14.7x 4.0% 4.5%

RKT 13.4x 12.7x 5.4% 6.1%

CHD 19.4x 18.3x 3.0% 3.7%

EV/EBITDA FCF Yield

Source: Bloomberg Finance L.P and J.P. Morgan estimates.

Figure 1: Select KVUE Brands

Source: Company reports.

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

8

Andrea Teixeira, CFA AC

(1-212) 622-6735

andrea.f.teixeira@jpmorgan.com

North America Equity Research

29 May 2023 J P M O R G A N

Resilient Sales Growth in Large Categories

Driven by Consumer Mega Trends

Kenvue is the largest pure-play company in the Consumer Health sector with 135+

years of history and a portfolio of iconic and trusted brands (science-backed, healthcare

professional recommendations) that many consumers are introduced to at a young age or

when they􀋖re most vulnerable (e.g., provided to you when you􀋖re not doing well by

someone that cares for you – like for a cut or an illness).

The company􀋖s portfolio is split into three segments: Self Care (40% of 2022 sales),

Skin Health & Beauty (29% of 2022 sales), and Essential Health (31% of 2022 sales).

All told, the categories in which KVUE competes represent a $369 billion market

globally that has grown at a three-year CAGR of +4.8% from 2019-2022 (or +3.5%

from 2018-2021 vs. overall CPG sector growth of around +3.1% over the same time

period).

Figure 2: KVUE 2019 Revenue Mix

Self

Care,

33.6%

Skin

Health &

Beauty,

32.2%

Essential

Health, 34.2%

2019

Source: Company reports.

Figure 3: KVUE 2022 Revenue Mix

Health &

,

Self

Care,

40.3%

Skin