DS Smith Plc

DS Smith PLC (LON: SMDS) is a corrugated packaging provider in Europe. It also provides plastic packaging services across the world. The company’s manufactured products are used for various purposes such as transportation of beverages, chemicals and pharmaceuticals.

Financial Highlights – H1 Financial Year 2020 (31 October 2019, £, million)

(Source: Interim Report, Company Website)

For the first half of the financial year 2020,the company’s revenue grew by 4 per cent on a reported basis (3 per cent growth at constant currency basis) to GBP 3,188 million due to the acquisitions made by the company. Adjusted operating profit of the company increased by 15 per cent on a reported basis (14 per cent growth at constant currency basis) to GBP 351 million due to the ownership of Europac for the period, and the net impact of corrugated box volume growth. The company’sadjusted earnings per share grew by 5 per cent on a reported basis (4 per cent growth at constant currency basis) to 17.4 pence. The company’sstatutory earnings per share grew by 26 per cent on a reported basis (26 per cent growth at constant currency basis) to 12 pence. The company has declared aninterim dividend of 5.4 pence per share during the period. The company’sreturn on sales went up by 110 bps to 11 per cent for the period.

Share Price Performance

Daily Chart as ofJanuary 20^th, 2020, before the market close (Source: Thomson Reuters)

DS Smith Plc shares were trading at GBX 357.2 at the time of writing before the market close (at 10:25 AM GMT) on 20^th January 2020 and were down by 0.39% versus the previous day closing price. Stock's 52 weeks High is GBX 397.80 and Low is GBX 306.30.The shares of the company have delivered a positive return of 3.36 per cent in the last quarter. The company’s stock has given investors 7.92 per cent of a negative return in the last month.

Conclusion
During the first half of the financial year 2020, the company delivered record profitability and return on sales. The company has gained market share with the help of multinational FMCG and e-commerce customers. The company has shown good organic profit growth. The company has a strong balance sheet and cash flows. In the long-term, the company persist in capitalising on the robust progress drivers of fibre-based packaging, with the prominent industry innovation driving differentiation in the market.

In the second half of the year 2020, the company anticipates an acceleration of volume growth. The company has paid dividends to its investors on a continuous basis which signifies its importance for its investors. The company has a positive outlook towards its business growth and a high potential for a bright future.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 354.60 (as on 20^th January 2020, before the market close at 9:00 AM GMT).