Credit Suisse ups target on Associated British Foods

Credit Suisse boosted its target price on shares of Primark-owner Associated British Foods following what it termed a "reassuring update" from the company, while its recommendation was kept at 'outperform'.

Analysts Charlie Mills, Alan Erskine, Molly Eggleton and Faham Baig highlighted upwardly-revised guidance from the ingredients producer from a forecast for full-year earnings to post a "modest decline" to a "marginal decline" now.

That led Mills and his team to raise their target price, derived from a blend of using the adjusted-present-value and and sum-of-the-parts valuation methods, from 3250p to 3450p.

The analysts said trading had edged past their forecasts in Sugar, Primark and Ingredients.

"After several years of downgrades the group looks to be turning a corner?," they asked.

Like-for-like sales at its Primark unit were back to flat for the first 24 weeks, they estimated, versus a decline of 0.5% over the first 16 weeks.

Margins also "looked better" at down by 110 basis points on their calculations.

Good 'spot' prices in sugar would feed-through into profits in China and Spain.

The turnaround seen over the last two years in the profitability of its ingredients arm was also continuing, the Swiss broker told clients in a research note.

"All-in-all, an encouraging update from ABF with H1 operating profits modestly ahead of last year, which is a touch better than we initially had."