M&A growth opportunities for Jerónimo Martins in Romania

Abstract

The following Work Project is an Equity Research report on Jerónimo Martins, SGPS, S.A., a leading food retail and distribution chain operating in Portugal, Poland and Colombia. The report initially provides, among others, an in-depth overview of the company’s business model, financial performance and fundamentals, as well as industry, strategy and competitive positioning. This report also extends the analysis of Jerónimo Martins’ business model, focusing on the company’s cost side through a deep dive on its supply chain. Afterwards, a detailed valuation of the company by business segment through a three statement model is undertaken, based on which the group is issuing a Buy recommendation stemming from a 29.5% calculated upside, which is further corroborated by valuating the company using alternative methods. This research then further analyzes the impact of the Sunday trading ban on the Polish food retail sector with particular consideration to Biedronka’s performance; the beauty and personal care market in Poland, uncovering the industry’s main parameters and trends as well as Hebe’s competitive positioning. The objective of this research is to analyze future international expansion opportunities of Jerónimo Martins in Romania. At first international market expansion strategies and motives for M&As are described. Subsequently, an overview of consolidation in the European food retail sector is given. Following on from this, the history of Jeronimo's acquisitions and expansions is briefly discussed. The main focus lies on the Romanian food retail market. This includes research on the market as well as an analysis of the competitive landscape. Based on these findings a valuation is conducted on a potential acquisition target through both intrinsic and relative methods