DAVY VIEW

Sudzucker (SZU) has delivered an improved Q3 result, underpinned by strong ethanol markets and lower sugar losses. The sugar segment has now delivered six consecutive quarters of losses, continuing to be weighed down by earlier contracting rounds and higher raw material costs. While the outlook for the sugar segment has improved, it will take time to convert to the P&L, while the sugar margin grid remains unclear. We will increase our FY2020E group operating profit forecasts to the mid-point of revised guidance; however, trading on 18 times FY2021E P/E, we believe the equity is stretched at these levels.