This report is an updated version of the report published on 8 May 2025 at 3:45 PM AEST.

Metcash Ltd (ASX: MTS)

Metcash Limited (ASX: MTS) is an Australia-based wholesale distribution and marketing company operating through the food, liquor, and hardware segments. The company serves a growing network of independent retailers in Australia and New Zealand. 

Recommendation Rationale - SELL at AUD 3.300

• Surpassed Resistance: MTS has trading close to the ‘Resistance 1’ level recommended on 10 March 2025. Therefore, MTS can face resistance at the current levels.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/EBITDA, Price/Book) are higher than median of the Food & Drug Retailing industry.
• Underlying Profit Decline: During H1 FY25, MTS reported a 5.5% YoY decline in underlying profit after tax, due to lower earnings in its Hardware pillar, increased finance costs, and higher depreciation and amortisation.
• Intense Competition: Cost pressures and margin compression, especially in Total Tools, where EBIT fell 16% due to price competition and higher costs. MTS faces intense competition from major players like Coles, Woolworths, and Aldi, making it harder for Metcash to support independent retailers in matching prices.

Daily Price Chart

 Daily Technical Chart, Data Source: REFINITIV

Valuation Methodology: Price/Cash Flow Approach (FY Apr'26E) (Illustrative)

MTS is expected to trade at a slight premium to its peers considering the recent acquisitions, like Superior Food, which diversify and strengthen Metcash’s food business, add immediate scale in the attractive foodservice market. For conducting valuation, the following peers have been considered: Elders Ltd (ASX: ELD), Synlait Milk Ltd (ASX: SM1), and Endeavour Group Ltd (ASX: EDV).

Considering the rally in share price movement, current trading level, and risks associated, the share price can witness resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 3.300, as of 8 May 2025, at 3:40 PM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 8 May 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.    

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.