New Invite | Oatly | Pre-IPO Black Book

Oatly has begun its roadshow ahead of its IPO next week. Oatly could be the next consumer brand crossing over to a global lifestyle brand. Oatly is a global oat milk producer to those vaguely familiar with it. To Oatly fans, it is a quirky brand selling delicious oat milk that is good for consumers and the environment. According to the company, it is a purpose-driven, leading, authentic ESG brand with a mission to improve the sustainability of the world and consumers' health. At the top end of the $15-17 range, the market capitalization would be close to $10B. Plant-based food is the fastest-growing food category, with producers in nearly every category looking to reformulate their offerings to meet the demand. Plant-based milk is the largest sub-category of plant-based food with built-in growth from 2/3 of adults worldwide that are lactose intolerant.

Oatly has several large growth opportunities. The company is driving consumer awareness of oat milk, which is still in the early innings of adoption. Oatly's demand drivers have been so effective that it has outstripped supply for the last few years and is projected to continue to do so in the future. It is growing geographically - the penetration in its home market is much higher than the markets it has entered recently, like the U.S., it is growing with new products - adding yogurt, spreads, butter, cheese, etc.

Oatly is challenged to expand its manufacturing capacity to keep up with demand. The IPO is raising funds for future growth. The company has announced new plant construction in three continents ahead of the IPO. In the U.S., we have documented frequent out of stocks.

We do not project positive EBITDA until 2023 or on a run-rate basis until the 2H of 2022. However, future margin expansion is visible after a rapid capacity build-out. The growth is undeniable, and Oatly needs to invest in its ability to meet demand better. The projected valuation represents a 5-fold increase from its last valuation round in July 2020. We will address the expected valuation and where we think the shares can trade.