No recommendation
No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.
(Sharecast News) - Panmure Liberum upgraded Associated British Foods on Monday to 'buy' from 'hold' and hiked the price target to 2,600p from 1,900p as it said the market underestimates the pace of recovery of Sugar profits.
Panmure said earnings in the sugar division are volatile and have a disproportionate impact on ABF's share price, which dissuades investors from buying the stock.
It argued that the sugar segment is a quality business that generates better returns than peers, but one that has material short-term earnings risks.
"We calculate that a carve-out of the ABF Sugar business could lead to an 13-15% higher value for shareholders, and a potential disposal could generate more," Panmure Liberum, said.
"However, we turn positive on ABF even with Sugar. We think the market underestimates the pace of recovery of Sugar profits, with actions already taken to address underperforming businesses."
Panmure also said the market underestimates the margin tailwinds at Primark, not just from FX but also efficiencies and operational leverage.
It forecasts a "potent" combination of 13% adjusted earnings per share compound annual growth rate over FY'25-28E, with around 7% per annum in dividends and buybacks.
At 1100 BST, the shares were up 3.6% at 2,121p.
The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.