Berenberg upgrades AB Foods to 'buy'

The bank noted shares have dropped more than 30% in the last three months and 20% in the last month alone, providing an entry point.

It argued that initially, fears were around trading momentum in the UK which was -1% at the first half due to the poor performance of the high street generally and unseasonable weather.

Berenberg said the company’s third-quarter update on 7 July is likely to confirm such fears and guidance may come under pressure.

“While the current macroeconomic uncertainty revolving around Brexit (including wild FX movements with GBP -10% versus the US dollar in the last week affecting Primark’s margins) does not help sentiment, we believe that with the shares now trading on 20x calendar 2017 P/E on our forecasts (27x average since 2014) this offers the best entry point in nearly three years.”

The bank said it still believes in the longer-term potential for the Primark rollout. It also said that sugar profits look set to take off again, having collapsed from £506m in 2012 to £43m in 2015 given near-term dynamics in global sugar prices.

At 1132 BST, AB Foods shares were up 7.5% to 2,527.00p.