VHC [OUTPERFORM +17.9%] - Earnings to fall in 2023 on economic turbulence - Update

- We downgrade our rating to OUTPERFORM from BUY as we expect the favorable supply-demand dynamics that should benefit VHC until mid-2023 will be offset by lower sales volume in 2023 due to a projection of flat global foodservice spending growth per the International Foodservice Manufacturers Association (IFMA).
- We lower our target price (TP) by 36% as we cut our aggregate 2022F-2025F NPAT-MI by 18%, mainly driven by a downward revision to our volume projections in 2023F/2024F. We also reduce our target EV/EBITDA multiples across segments by 15% to reflect a 100-bp increase in our house cost of equity. In addition to rolling over our TP from mid-2023 to YE2023, we apply a 10% valuation discount due to VHC’s significant holdings and provisions for equity investments.