HSBC upgrades Greencore to 'buy', shares rally

Greencore rallied on Wednesday as HSBC upped its stance on shares of the Irish convenience food maker to ‘buy’ from ‘hold’ and lifted the price target to 170p from 120p as it argued the roadmap out of lockdown underpins a recovery in the food to go business.

"While individuals will not be able to enjoy a meal indoors until 17 May, we see the upcoming spring months as a turning point for demand for food to go (FTG) as a convenient option for people to consume food as they start socialising outdoors," HSBC said.

The bank said that while the government has not ruled out reintroducing restrictions at a local level if needed, the initial stage can be compared to the market conditions seen in October 2020.

"At that time, Greencore’s FTG sales were still down 22% year-on-year but at a much better level versus Q4 20 (-29% year-on-year) and versus January 2021 (-35% year-on-year).

"We therefore see the announced roadmap as a set timetable and an opportunity for Greencore to start building back its FTG business and leveraging its improved supply chain as well as existing and new business opportunities."

As a result of improved visibility on a return to normality, downside risk to Greencore’s earnings "reduces markedly", HSBC said.

At 0940 GMT, the shares were up 6.3% at 157.25p.