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(Sharecast News) - RBC Capital Markets downgraded 3i Group on Monday to 'underperform' from 'sector perform' and cut its price target on the stock to 3,000p from 3,250p as it said the valuation was still "on the full side".
The Canadian bank said it was concerned that Dutch retailer Action, in which 3i holds a majority stake, was at risk of moving into a period of diminishing returns, given macro pressures on its customers, increased maturity and competition in major markets.
"This looks somewhat at odds with its premium valuation," RBC said. "We think 3i, including Action, remains a high quality business with a strong management team, but we see more valuation upside for several other stocks in the sector. Hence, we move our sector relative rating to underperform."
RBC said it had cut its price target on the stock owing to a revision of its longer-term expectations for the business.
"Despite a derating in recent months, Action is still trading at circa 28x CY26e price-to-earnings," it said. "This looks on the full side to us, compared to others in European retail with stronger LFL sales outlooks."
Analysts at Berenberg initiated coverage on convenience foods manufacturer Greencore with a 351p target price and a 'buy' rating on Monday, stating the group was succesfully "delivering convenience".
Berenberg thinks that Greencore is well placed to continue to deliver "strong medium-term growth", with structural growth tailwinds underpinning this. It also pointed out that Greencore's recently completed acquisition of Bakkavor "has the potential to transform the business".
"The acquisition expands Greencore's competitive moat, deepening relationships with customers, increasing the opportunity for category expansion and new product development, and thereby helping to lock out competition due to its increased scale - allowing it to become a category leader in the food-to-go and freshly-produced food market," said Berenberg.
The German bank also expects to see "significant cash generation", enabling Greencore to invest to grow its market share, deleverage and offering scope for further mergers and acquisitions.
"We forecast a 14% three-year EPS CAGR, with upside potential, and see Greencore trading on a FY27E P/E of 11x (a 7.3% FCF yield) - in line with its three-year average despite the improved growth prospects," said Berenberg.