Why the Lynch Group (ASX:LGL) share price is climbing today

The floral company’s shares received a welcomed boost today.

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The Lynch Group Holdings Ltd (ASX: LGL) share price is in the green during lunchtime trade. This comes after the flower and potted plants company provided a trading update and earnings guidance for FY21.

At the time of writing, Lynch Group shares are fetching $3.73, up by 4.19%.

Trading update

Investors are buying up Lynch Group shares following the company’s positive update to the ASX.

In today’s statement, Lynch announced it’s experiencing strong growth in both of its markets in Australia and China.

Last month, the company delivered its largest floral event of the year in Australia — Mother’s Day. This saw Lynch make a record investment in chartered freight and merchandising hours to meet the robust demand.

As well, the company continues to benefit from improving consumer perceptions of supermarket floral quality. As such, its Australian segment is in line to meet its forecast financial performance at the end of FY21.

Moving onto China, Lynch stated its Van den Berg Asia integration is running smoothly. The company’s currently constructing additional growing capacity to service increasing demand across Yunnan Province. To put that in context, the Chinese retail floral market is estimated to be worth around $19 billion, compared to Australia’s $1.37 billion.

Pleasingly, Lynch has benefitted from recent stronger than expected pricing in China. This, in turn, enabled the company to increase production to cater for demand. As a result, Lynch’s Chinese business is expected to exceed its forecast financial performance for the current financial year.

Outlook

For the upcoming period ending 27 June 2021, Lynch anticipates reporting a bumper result. This is expected to be well up on the earnings guidance outlined in its prospectus, released in early April on the ASX.

As such, net profit after tax and amortisation (NPATA) is forecast to come in between $31 million and $32 million. Originally, Lynch predicted NPATA to stand at $28.7 million.

In addition, in the first half of FY22, NPATA is projected to be around the same as stated in the prospectus – $14.7 million. This implies a proforma NPATA of $31.6 million to $32.6 million for the current calendar year (ending 26 December 2021)

Lynch is scheduled to report its FY21 results on or around 26 August 2021.

About the Lynch Group share price

Founded in 1915, Lynch is a vertically integrated wholesaler and grower of flowers and potted plants. It is the largest wholesaler of floral and potted products to Australian supermarkets. The company also operates in China as a leading grower and wholesaler of premium flowers.

Since listing on the ASX boards in April for a price of $3.60 apiece, Lynch Group shares have edged slightly higher. The company’s share price reached an all-time high of $3.86 on 20 May.

On valuation grounds, Lynch commands a market capitalisation of roughly $455 million, with over 122 million shares outstanding.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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