HW Global Ltd., Raffles Place, #40-02, One Raffles Place, Office Tower 1, Singapore 048616 Email: [email protected] September 29th, 2020 Danone Due Diligence Report Hatchworks has conducted due diligence on Danone, a leading global food & beverage company that is built on the following product lines: Ÿ Essential Dairy and Plant-Based Products — 52% of Danone's revenue. Ÿ Waters — 18.2% revenue. Ÿ Specialized Nutrition — 29.8% revenu. Danone was founded in 1919 and has sold products to over 120 markets. Comprising a diversified portfolio, Danone includes many popular and well known brands such as Activa, Actimel, Alpro, Vega, Silk and many more. Danone aims to inspire healthier and more sustainable eating and drinking practices. Headquartered in Paris, France, Danone is listed on the Euronext Stock Exchange, under the symbol ''BN''. Financials — Danone (Source: Marketscreener.com, investing.com) Ÿ Current market cap is €35.4B and stock price is around €55. Ÿ With a predicted net-income growth of 15% for 2020E and 2021E, and a net income estimate for 2021E of in excess of €2.2B, this points to a P/E ratio of 16x. The revenue/sales forecast is €24.7B for 2021E, indicating an EV/Sales ratio of 1.96x. Ÿ In terms of profitability, an operating margin of 14.6% is predicted for 2021E. This is slightly lower than some of Danone's competitors; for example, Pepsico (PEP) has an. operating margin of 15.8% for 2021E. Ÿ Danone (BN) is a yielding equity with a decent yield of 3.73% for 2021E. In July 2020, Danone (BN) invested €100M to strenghten its ''Specialized Nutrition'' in China. These investments include the opening of an open-science research centre based in Shanghai, the acquisition of local infant milk formula capabilities, and the expansion of capacity to further develop food for people whose nutritional requirements cannot be met by normal foods. Also, by 2025, Danone (BN) aims to become one of the first multinational companies to obtain B Corp certification. Certified B corporations are for profit companies that use the power of business to build a more inclusive and sustainable economy. According to our analysis, Danone (BN) has a good dividend yield, and solid growth prospects. Combined with the fact it operates in a defensive sector, Hatchworks will maintain its position. The Hatchscore is out 5.6 of 10. Full details can be found on Hatchnet: www.hatch-net.com/companies Big Investors: Advisors & Bookrunners: Competitors: Management Team: Ÿ The Vanguard Group Ÿ Barclays Ÿ Nestle (NESN) Ÿ Emmanuel Faber: Chairman & CEO Ÿ Massachusetts Financial Service Co. Ÿ HSBC Ÿ General Mills (GIS) Ÿ Bertrand Austruy: Executive VP, Human Resources & General Secretary Ÿ First Eagle Investment Management, LLC Ÿ Cititgroup Ÿ Kellog Company (K) Cecile Cabanis: Executive VP, CFO, Technology Ÿ Norges Bank Investment Management Ÿ J P Morgan Ÿ Pepsico (PEP) Ÿ & Data, Cycles & Procurement What are the Risks? 1. The covid-19 pandemic could potentially have a significant impact on the company's employees, commercial partners and operations, and therefore by default the financials and profitability too. 2. Danone is still heavily dependent on plastic. It is possible therefore that once the new plastic waste legislation comes into force, costs of plastic will rise. As a result, this could hurt Danone's profitability. 3. Danone's businesses are directly related to nature and agriculture, so it is possible climate change could affect the long-term sustainability of Danone's operations. Legal Disclaimer - This report summary has been generated as a result of Hatchworks' proprietary company vetting and filtering system. The level of due diligence conducted on investible assets ranges from mediocre to significant, the latter being the case where Hatchworks has explicitly taken strategic positions in. By no means is the information in this file to be relied on as investment advice; this includes Hatchworks' algorithmic composite score known as 'Hatchscore'. Hatchworks has not received any compensation for this research. For more information you can reach us at [email protected]. This report is not for distribution in the United States of America. It is closed to U.S. citizens. If you are a U.S. citizen, you should delete this report or return to sender..