Greggs plc (GRG.L) | Investment Case

1. Company Snapshot

1.a. Company Description

Greggs plc operates as a bakery food-on-the-go retailer in the United Kingdom.It offers a range of fresh and frozen bakery products, sandwiches, and drinks.The company sells products to franchise and wholesale partners for sale in their own outlets.

It is also involved in the property holding, non-trading, and trustee businesses.The company operates approximately 2,200 shops and 375 franchise locations.Greggs plc was founded in 1939 and is headquartered in Newcastle upon Tyne, the United Kingdom.

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1.b. Last Insights on GRG

Greggs' recent performance has been impacted by slowing sales growth, attributed to a heatwave in July that deterred consumers. The company has delayed new store openings and raised prices in response. However, a sales recovery was reported after cooler weather returned. Greggs is expanding its presence with new store formats, including smaller Bitesize shops and its first pub, The Golden Flake Tavern. Additionally, the company has launched innovative products, such as Christmas cards with a free sausage roll offer.

1.c. Company Highlights

Last Price	1674
Change Percentage	5.28%
Open	1650
Previous Close	1590
Market Cap ( Millions)	1705
Volume	1030419
Year High	2890
Year Low	1407.2
M A 50	1605.36
M A 200	1737.96

FCF Yield	-0.99%
Dividend Yield	3.35%
ROE	25.41%
Debt / Equity	79.33%
Net Debt / EBIDTA	146.42%
Price To Book	3.02
Price Earnings Ratio	11.87
Price To FCF	-101.48
Price To sales	0.82
EV / EBITDA	7.42

2. Transcript Summary

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3. NewsRoom

Greggs launches Christmas cards complete with gift of sausage roll

Dec -01

Source:

Greggs launches new smaller Bitesize shops as expansion continues

Nov -10

Source:

Greggs (LSE:GRG) Valuation in Focus as Stock Momentum Builds

Oct -07

Source:

Greggs delays new store openings as sales growth slows

Oct -01

Source:

Greggs calls for no ‘surprises’ in Budget as it raises prices this week

Oct -01

Source:

Greggs shares soar as sales recover from summer heatwave slump

Oct -01

Source:

Trending tickers: Spotify, Nike, Pfizer, Berkshire Hathaway, Greggs

Oct -01

Source:

Greggs sales growth cools after July heatwave deters consumers

Oct -01

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.60%)

6. Segments

Retail Company Managed Shops

Expected Growth: 9.0%

The retail segment is expected to grow at a rate slightly higher than the global revenue growth hypothesis due to the company's efforts to innovate and expand its customer base. The steady demand for convenient food and drinks is expected to drive growth in this segment.

Business to Business (B2B)

Expected Growth: 8.0%

The B2B segment is expected to grow at a rate slightly lower than the global revenue growth hypothesis due to potential headwinds from changes in working patterns. However, the company's strong reputation and diverse offerings are expected to support continued growth in this segment.

7. Detailed Products

Savouries

Greggs offers a wide range of savoury products including sausage rolls, steak bakes, and chicken bakes.

Sandwiches

Greggs offers a variety of sandwiches, wraps, and flatbreads, including classic combinations and limited-edition seasonal options.

Cakes and Bakes

Greggs offers a wide range of sweet treats, including cakes, biscuits, and pastries.

Coffee and Drinks

Greggs offers a range of hot and cold drinks, including coffee, tea, and soft drinks.

Breakfast Items

Greggs offers a range of breakfast items, including bacon rolls, sausage rolls, and breakfast sandwiches.

Fresh Food

Greggs offers a range of fresh food options, including salads, fruit, and yoghurts.

8. Greggs plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Greggs plc faces moderate threat from substitutes as customers have limited alternatives for freshly baked goods and sandwiches. However, supermarkets and convenience stores offer some substitutes, which can affect sales.

Bargaining Power Of Customers

Greggs plc has a large customer base, which reduces the bargaining power of individual customers. Additionally, the company's products are relatively low-cost, making it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

Greggs plc relies on a few large suppliers for ingredients and raw materials. While the company has some bargaining power due to its scale, suppliers can still exert some pressure on prices and quality.

Threat Of New Entrants

Entering the bakery and sandwich market requires significant investment in infrastructure, equipment, and staff training. This barrier to entry reduces the threat of new entrants for Greggs plc.

Intensity Of Rivalry

The bakery and sandwich market is highly competitive, with many established players and frequent promotions. Greggs plc faces intense rivalry from competitors like Pret a Manger, Costa Coffee, and Caffè Nero.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	37.58%
Debt Cost	4.26%
Equity Weight	62.42%
Equity Cost	10.43%
WACC	8.11%
Leverage	60.20%

11. Quality Control: Greggs plc passed 5 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Sainsbury

A-Score: 6.8/10

Value: 7.4

Growth: 7.6

Quality: 2.5

Yield: 7.5

Momentum: 7.0

Volatility: 9.0

1-Year Total Return ->

Kesko

A-Score: 5.7/10

Value: 5.6

Growth: 4.2

Quality: 3.6

Yield: 7.5

Momentum: 4.0

Volatility: 9.0

1-Year Total Return ->

Axfood

A-Score: 5.6/10

Value: 4.2

Growth: 5.8

Quality: 4.1

Yield: 5.6

Momentum: 5.0

Volatility: 9.0

1-Year Total Return ->

Colruyt

A-Score: 5.2/10

Value: 7.7

Growth: 4.6

Quality: 4.3

Yield: 6.9

Momentum: 1.0

Volatility: 7.0

1-Year Total Return ->

Carrefour

A-Score: 5.2/10

Value: 7.4

Growth: 4.6

Quality: 1.6

Yield: 7.5

Momentum: 2.5

Volatility: 7.7

1-Year Total Return ->

Greggs

A-Score: 5.0/10

Value: 7.1

Growth: 6.6

Quality: 5.7

Yield: 6.2

Momentum: 0.5

Volatility: 4.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

21.05%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

8.11%

Greggs plc - GB00B63QSB39

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on GRG

1.c. Company Highlights

Higher Growth

Expensive

Average Quality

Better Quality

Fairly Valued

Earnings Beats

Medium Volatility

Stable Momentum

Revenues Miss

Weak Momentum

Average Growth

2. Transcript Summary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.60%)

6. Segments

Retail Company Managed Shops

Expected Growth: 9.0%

Business to Business (B2B)

Expected Growth: 8.0%

7. Detailed Products

Savouries

Sandwiches

Cakes and Bakes

Coffee and Drinks

Breakfast Items

Fresh Food

8. Greggs plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Greggs plc passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

16.74$

Current Price

16.74$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA