Berenberg starts McBride at 'buy'

(Sharecast News) - Berenberg initiated coverage of McBride on Thursday with a 'buy' rating and a 275p price target, saying the householdproducts manufacturer had rebuilt margins and its balance sheet to the point where a more optimistic growth outlook was now emerging.

Berenberg said McBride's renewed strategic focus had driven a "muchimproved" operational and financial profile, supported by rising privatelabel penetration across Europe and Asia. Privatelabel now accounts for around 36% of the household cleaning market, helped by stronger value propositions, retailer push from discounters, shrinkflation in branded goods and higher postpandemic hygiene spend.

The German bank said McBride was well positioned in its core Western European markets, with scale and deep retailer relationships supporting marketshare gains through crossselling and new contract wins. It also expects growing opportunities in contract manufacturing, citing the recent £51m Vestacy partnership as an example of longterm, stable revenue streams.

Berenberg also noted that a stronger balance sheet has enabled a £40m reduction in net debt, leverage falling from 4.9x to 1.2x, the reinstatement of dividends and a £20m buyback. Berenberg, which higlighted that its 275p target price implies around 50% upside, stated this now provides capacity for further M&A as McBride continues to act as a consolidator in a fragmented European market.

Reporting by Iain Gilbert at Sharecast.com