Broker tips: Fevertree,Tristel

The broker, which has a ‘hold’ rating on the shares, pointed to the improving cost outlook.

Liberum noted that trading year-to-date has been in line with expectations and the company has maintained guidance of 13% to 18% sales growth and £36m to £42m adjusted EBITDA.

"Encouraging signs include a strong UK On-Trade performance with value share in 1Q’23 6pts higher than 1Q’20, and a strong start in both On and Off-Trade in the US," it said.

"Cost pressures, particularly in glass, remain elevated for 2023 but should subside from 2024 onwards, with self-help initiatives like local US production. It remains to be seen how low glass and logistics costs end up which remains key to the pace of the margin recovery, but we see a return to historic levels of high 20%s/low 30%s EBITDA margin as unlikely."

Liberum said the brand’s 2-4x price premium and dependence on glass to enforce the premium nature leave it less flexible on pricing and vulnerable to cost pressures.

It added that the current valuation at 35x EV/EBITDA and 60x price-to-earnings remains high - versus a 10-year average of 34x and 47x - already builds in some margin recovery expectations.

Elsewhere, Numis started coverage of Tristel with an ‘add’ rating and 390p price target.

It said Tristel is a unique play within UK Medtech, offering high-level disinfectants, backed by a proprietary chemistry, used for the decontamination of medical devices and surfaces in hospitals.

"We think Tristel could more than double revenue and profits over five years, with the base business underpinned by diagnostic procedure demand, while potential US market expansion, pending FDA approval, represents a significant growth inflection point, which we believe is partly discounted."

Numis said that optically, its multiple - circa 15x EV/EBITDA - is not particularly cheap, but should growth catalysts materialise, "we could see outer year multiples unwind".

"With the FDA decision pending (Jun-23), we account for some US optionality, setting our target price at 390p, and initiate with an add rating."