Berenberg raises target price on Tate & Lyle

Berenberg upped their target price on Tate & Lyle's stock from 665p to 695p after having cut its 2021 forecasts for the group by over 20% since March.

Although volumes in T&L's food and beverage solutions unit declined 2%, broadly in line with its forecast for a 1% decline, volumes in the primary products division declined just 12% - much better than its expectations of a 20% drop. Overall, group revenues decreased 5%, helped by positive price/mix.

The German bank said recent results had shown the progress Tate had made in important areas like product mix and productivity

measures but the analysts highlighted that as with peers, where Tate's 2021 full-year earnings ultimately land will depend on the timing of lockdowns and subsequent easing measures.

However, Berenberg noted that Covid-19 had again highlighted several vulnerabilities of Tate's business model - high exposure to out-of-home consumption, high fixed costs and lingering exposure to commodities like ethanol.

But on the more positive side, Berenberg said Tate's liquidity position was "strong" and noted that the group was now trading on 14x calendar 2021 price-to-earnings ratio - a 30% discount to global staples - broadly in line with its 25% average discount for the past five years.