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(Sharecast News) - Berenberg hiked its target price on food and beverage products business Tate & Lyle from 464p to 554p on Wednesday as it said the group had delivered "strategic momentum amid offer uncertainty".
Berenberg said Tate & Lyle has entered FY27 with positive end-market and strategic momentum, with management hoping that these factors will accelerate the company's evolution into a "strategic reformulation partner", supporting stronger volume momentum and, ultimately, a valuation re-rating.
However, while the German bank noted that this transition has "long been promised by management", it also highlighted that it was yet to materialise.
Berenberg said it was now waiting to see further evidence that the completion of the CP Kelco integration would mark "a sufficient catalyst to drive the desired changes". It also noted that these dynamics were accompanied by Ingredion's proposed offer to acquire Tate & Lyle, which it thinks offers "mixed outcomes for shareholders".
"We have lowered our earnings forecast to reflect the newly issued FY 2027E guidance from the company. The downgrade to our FY 2027E forecast is largely reflective of lower margin expectations, partly stemming from the profitability headwind associated with the biogum capacity consolidation delay," said Berenberg, which has a 'hold' rating on the stock.
"We have adjusted our valuation methodology to take a mixed approach: 75% reflective of the 615p proposed offer from Ingredion, with the residual attributed to a DCF valuation methodology (379p). Tate & Lyle trades on 12.2x 12 month forward P/E, slightly above its trailing 10-year historical average."
Reporting by Iain Gilbert at Sharecast.com
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