According to Macquarie analysts, bottles and cans manufacturer Orora Ltd (ASX: ORA) is "past the worst" of the downturn and should deliver double-digit returns.
The $2.7 billion company touts itself as a "global leader" in the design and manufacture of glass bottles and aluminium cans, with significant manufacturing sites across Australia, New Zealand, and the world.
In August, the company reported a 9.5% increase in earnings before interest and tax to $262.1 million for the full year, and managing director Brian Lowe said Orora was entering the current financial year with "cautious optimism".
With demand for cans remaining strong, we continued to invest in our cans capacity expansion program which will allow us to service expected customer demand to at least 2030. In response to reduced demand across the global glass packaging industry, we took decisive action to review the production capacity of our glass business and adjust our network, with the resizing of our Gawler facility in Australia and our Le Havre facility in France.
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Shares looking cheap
Macquarie analysts said the glass division was "past the worst", while the outlook for the cans division was positive.
They said the Orora balance sheet was "robust", which was an enabler for ongoing share buybacks, and with capital expenditure requirements reducing, free cash flow would improve "meaningfully" from this financial year onwards.
"Orora has long-term value potential, and the market has been reminded of this over [the] past 12 months'', Macquarie analysts said.
They also noted there was the potential for corporate interest given the company's depressed share price.
Macquarie has a price target of $2.40 on the stock compared with the current price of $2.09, and an outperform rating.
