Broker tips: Greggs, Haleon

Greggs is "the undisputed UK food-to-go specialist", it said, with a share of around 8% of a "highly fragmented" market.

Numis said the company’s track record is impressive, reporting 10-year CAGR store growth of 3.4%, revenue of 7.5% and pre-tax profit of 11.3%.

It noted that in 2021, management set out to double revenue from £1.2bn to £2.4bn by 2026 and has already achieved half of this.

"However, over the next three years an increasing amount of this growth will originate from franchisees, delivery and loyalty, all dilutive to gross margin and in most instances to EBIT margin too meaning we forecast profit before tax CAGR of circa 10%," it said.

"The shares are trading at 20x FY24E price-to-earnings rate, in line with five-year average and therefore we initiate with a hold."

The broker said it prefers Domino’s, which has a clearer growth trajectory, is less capital intensive and trades at an 8% discount to Greggs.

JPMorgan placed consumer health company Haleon on 'negative catalyst' watch ahead of its annual report next month, saying volume and earnings risks will weigh on the stock's rating.

The bank cut its target price for the Sensodyne, Panadol and Advil manufacturer from 295p to 290p and reiterated an 'underperform' rating.

"Having delivered strong volumes vs staples peers over the past two years, we expect top line to disappoint as the tailwinds that boosted its OTC divisions abate. Volumes should remain pressured vs sequential improvement for peers," JPMorgan said.

The bank highlighted the unravelling of Covid-led tailwinds like higher flu incidence and China's Covid wave, as well as a muted performance in the rest of the business.

JPMorgan expects 2024 like-for-like sales to grow by just 3.7%, below the company's guidance of 4-6%, and forecasts a "pedestrian margin rise" given headwinds including slowing volumes, FX movements, and dilution from the disposal of Lamisil last year.