McBride is the European market leader for private label household cleaning and has emerged from a period of unprecedented cost inflation as a stronger, leaner, more profitable business. Adj. EBITDA margins have risen above 9%, and been sustained, driving excellent 30%+ ROCE and cash generation. In this detailed report we review the attractive investment thesis for McBride and conclude its current low valuation is an anomaly. We initiate coverage with a 235p Fair Value equating to 10x PER, 6x EV/EBITDA and a c.6% FCF yield (cal 2026).
As a result of the group’s improved profitability, ROCE has jumped to 32%-33% and net debt has fallen to just 1.2x EBITDA. In addition, dividends have been reinstated, starting at 3p for FY25. Yet despite this, McBride is trading on only c.5x PER. This is at odds with the wider consumer sector where we see stocks with similar metrics trading on at least 10x PER. Hence we believe that as confidence in the sustainability of McBride’s profits grows, its shares will re-rate significantly.
