J Sainsbury PLC

J Sainsbury PLC (LON: SBRY) is an FTSE 100 index listed food retailer that operates over 600 supermarkets, 900 convenience stores, and employs around 189,000 people.

On 3 November 2022, SBRY expects to release interim results for H1 FY23.

Investment Rationale for Valuation – Watch at GBX 182.35

• Property Transaction Update: On 26 September 2022, SBRY affirmed that it is not proceeding with the disposal of 18 supermarket stores to LXi REIT PLC to part-funded the transaction.
• Lower Margins: In FY22, gross margin and net margin were 7.9% and 2.3%, respectively. Both the margins were lower than the industry median.
• Share Price Downtrend: SBRY’s stock has plunged over 37% in the past year, reflecting a significant underperformance against the benchmark FTSE 100 index.
• Macroeconomic Risks: Four-decade high inflation, cost-of-living crisis, monetary policy tightening, supply chain challenges, and expected recession can continue to impact the Company’s performance.
• Technical Standpoint: The MACD line has given a bearish crossover against the signal line, while it is hovering below the centreline.

One Year Share Price Chart

(Source: REFINITIV, Analysis by Kalkine Group)

Conclusion

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

Based on the macroeconomic uncertainties, and bearish technical indications, a “WATCH” recommendation has been given on J Sainsbury PLC at the closing market price of GBX 182.35 (as of 28 September 2022).

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 29 September 2022. 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 the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 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.

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