in depth technical analysis fruit

Unprecedented sales drop

The Firm suffered a net loss of PHP 27.4 million in Second quarter (2Q) as it suspended the operations of nearly all its stores in the midst of enhanced social quarantine. Nearly 70% of FRUIT ‘s stores are already operating, and future reopening and growth would be largely focused on customer traffic.

Pivot of Goods Distribution

Several firms, including FRUIT, have expanded distribution services to locate additional demand. Nevertheless, FRUIT has effectively improved its deliveries. Their distribution profits were never more than 5% of their overall sales before the pandemic, and they are now 6 % of the total operations. FRUIT also aims to extend its distribution networks in high-density provinces such as Metro Cebu. This should allow FRUIT to begin tapping the market for supplying beyond NCR.

New shop model

As mentioned, most FRUIT stores are in malls hence, it looks to expand its newly launched community store model to offset this. Community stores acts as distribution centers, allowing FRUIT to reach more customers. For now, only Babot’s Farm and Soy & Bean’s products are being sold, while FRUIT’s other brands will soon be available. FRUIT has already secured 30 locations and planning to open 100 community store models by 2021. The company currently operates 11 community stores (5 Babot’s Farm, 6 Soy & Bean).

Recommendation

Fair value Target price has been decreased from 2.45 to 1.81

Expecting its earnings to start significantly rebounding by 2022, assuming local demand sees recovery near pre-pandemic peaks during that period.

If you are into long term investing, BUY with target price of 1.81

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