Citi upgrades Tate & Lyle, says medium-term upside not reflected in valuation

Citi upgraded Tate & Lyle on Thursday to ‘buy’ from ‘hold’ as it argued that energy headwinds are manageable and that medium-term upside is not reflected in the valuation.

"Although near-term it is more exposed to gas inflation than peers, we estimate that downside to consensus EBIT is limited to mid-single digit percentage in FY24 once adjusted for pricing and self-help, and after de-rating versus FTSE250, valuation is attractive."

Citi said it likes Tate for its "transformational story" with defensive characteristics, and thinks it can deliver a 9% normalised EBIT compound annual growth rate, which is not appreciated at current levels.

"Further upside comes as it narrows the valuation discount to higher-multiple ingredients names," Citi added.

At 1030 BST, the shares were up 2.2% at 711.60p.