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This report is published for educational purposes only by students competing in the CFA Institute Research Challenge.

Food and Beverages

ORIOR GROUP
Recommendation: ● BUY Price Target: ● CHF55.31

Ticker: ● ORON Price: ● CHF46.5 (01 Dec 11)
Year EPS (CHF) P/E ratio 2010 4.55 10.2 2011E 3.53 13.2 2012E 3.71 12.5 Source: Company data and self estimated

Highlights
• Buy recommendation with a target price of CHF 55.3, offering a 19% upside from current stock price as of 1st December 2011. EBIT margin is expected to remain 7% during five year forecasting horizon owing to the continuous improvement of EBIT margin in the convenience segment. Moreover, further efficiency gains in term of technology and productivity will support margin expansion. • Temporary drop in sales followed by gradual recovery: under both impact of recession and the loss of one client, we forecast a slight decrease in sales of -0.74% in 2011 based on half year result of 2011. Afterwards, there will be a gradual increase of 2% annually starting from 2012, which is in line with estimated economic recovery and sales contribution from two acquired companies named Keller SA and Bernatur in 2011. • Convenience is a key segment: the Group’s EBITDA target of 10% is completely achieved by soon capturing the increasing trend of convenience segment (“ready meal”, “food services” and “vegetarian food”), which is expected to grow by 4.4% until 2014 (Figure 7). Moreover, we anticipate a gain from prospective customer base through offering catering service to offices, school’s canteens and in numerous events. • Cost efficiency continues generating more cash flow: this is the result of diversification of supplier range from developing countries, which provides raw materials with guaranteed quality at lower cost. Orior also benefits from import thanks to the Swiss franc appreciation

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