Berenberg reiterates 'buy' rating on Treatt

Berenberg said Treatt's year-to-date trading update was in line with expectations, something it views as a "positive" in the context of recent earnings misses by larger companies in the ingredients sector.

"There are reasons to be optimistic that Treatt can outperform the market in the near and medium term. Firstly, its well-flagged coffee contract should provide circa 3% of organic growth in FY23. Secondly, its move to its new UK facilities is almost complete, which removes capacity constraints and improves sales opportunities. Finally, we continue to think that growth in natural ingredients will outpace the broader ingredients industry, in line with trends observed over the past three decades," said Berenberg.

"Reported revenue growth of 9% was boosted by an FX tailwind, while underlying volumes were broadly flat versus last year. Q2 and Q3 are more important trading periods for Treatt, and with its sales pipeline in good shape, we think it is well set to deliver on our estimates."

The German bank reiterated its 'buy' rating and 780.0p target price on the stock, highlighting that although Treatt's valuation appears "high on headline multiples", it thinks "investors are well compensated" by a "strong" earnings pipeline.

Reporting by Iain Gilbert at Sharecast.com