Berenberg hikes target price on Cranswick

Berenberg said Cranswick's competitive moat was expanding as its market share increases on the back of the outperformance of its key customers, as well as capital investment that has delivered capability improvement.

The German bank, which reiterated its 'buy' rating on the stock, said Cranswick's interim results had depicted this phenomenon, with Cranswick's key customers outperforming peers and delivering market share expansion to the firm on the back of "significant investment" in productivity and efficiency improvements.

Berenberg also noted that Cranswick will now look to continue to pursue investment in capability expansion and partner with its key customers to deliver growth in underdeveloped opportunities such as pet food, the result of which it expects to be an increase in return on capital employed, top-line growth acceleration and a possible rerating catalyst.

"ROCE expanded 54 basis points year-on-year to 16.4% in H1 2024, reflecting management's commitment to expand capability in pursuit of underdeveloped growth opportunities. The commitment to capability enhancement was rewarded in H1 2024 through newly won value-added

poultry business. We expect the ramp-up of pet food volumes in FY 2025 to enable ROCE to further expand towards the high-teens level to which management intends to return (we model pre-tax ROCE of 18.1% in FY 2026)," said Berenberg.

"Further, we highlight the strength of the balance sheet, the strong cash generation, and the opportunity pipeline ahead as levers for management to pull in order to widen the capability gap versus peers."

Reporting by Iain Gilbert at Sharecast.com