Berry Global

Ticker
$BERY
Industry
Materials
Type
Delever
Rating
Covered
Category
Core
Target Price
$87.00
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Berry Global (formerly known as Berry Plastics) is a plastic packaging manufacturer. With products in consumer, healthy, cosmetics, shipping, etc. Berry was PE-owned prior to coming public via IPO in 2012. Since coming public, they have maintained higher leverage (4-5x EBITDA) while rolling up competitors.

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Notes

FY22 guidance — $70 = <10x earnings
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Share buybacks — Management is starting a buyback program for the first time in company history with a $1bn announcement in 1Q22 — they expect to repurchase at least $350m in FY22
Margin pressure — BERY is facing pricing pressure in supply chain from resin input costs to transportation.

Financials & Valuation

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1Q22 — At 8.5x FY22 EBITDA (competitors trading at 8-10x) of $2.3bn ($2.25-2.35bn guidance) = $19.6bn enterprise value. I anticipate net debt should fall from $8.4bn at FY21 to $8bn at yearend FY22. Equity value would be $11.6bn on 133m share count (assuming 2m net share count reduction from the $350m buyback) = $87 price target in 12 months.

Resources

Berry Global ($BERY) — Initiation (5/26/20)