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Jefferies Sees Potential Upside in Metcash's Hardware Business

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Metcash (ASX:MTS) had a robust start to fiscal 2027 for its Hardware business despite challenging conditions, as sales momentum improved after a weak May, Jefferies said in a note on Monday.

The firm sees room for upside in hardware business' margins, with potential for AU$13 million to AU$54 million to be added to group EBIT if conditions improve.

The wholesale distributor reported strong cashflow, with fiscal 2026 operating cash flow reaching AU$558 million, beating Jefferies' estimate of AU$519 million.

"MTS is proving to be one of the best cash generators in our coverage," the firm commented.

The decline in Tobacco sales appears to have bottomed due to market share gains and increased enforcement, it added.

Jefferies maintained a buy rating and price target of AU$3.50.

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