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Packaging and box maker Amcor Plc (ASX: AMC) is solidly undervalued at the moment, according to Macquarie analysts. They say the savings from its US$8.4 billion merger with Berry Global are not being priced in.
Amcor finalised the Berry merger on April 30, and said at the time it expected to extract US$650 million in savings across the combined businesses by FY28.
"Including full run rate synergies, annual cash flow is expected to exceed US$3 billion by fiscal 2028, providing significant capacity for Amcor to fund organic reinvestment, value accretive M&A and shareholder returns through a compelling and growing dividend and share repurchases, taking long-term shareholder value creation to a new and higher level", Macquarie said.
Macquarie says the current share price of $12.41 fails to factor these cost savings in, and has a much more bullish price target of $17.46 on the stock.
Its analysts say the combined business is expected to be the market leader across a number of packaging types "with prospects for above system growth driven by cross sell opportunity and product innovation''.
Catalysts for the stock to rerate will be delivering on those cost savings over the current financial year, recovery in the fast-moving consumer goods sector, and potential divestments following a portfolio review, Macquarie said.
Risks included a possible failure to meet the cost-saving targets or further volume declines driven by weaker economies and cost-of-living pressures.
