Berenberg upgrades Hilton Food to 'buy'

Berenberg said Hilton Food's recent profit warning provided investors with "a clear buying opportunity", stating the group's offering was "highly valuable" to grocers by offering them a way to meaningfully reduce cost, improve their supply chains and deepen their product offering.

The German bank stated headline slim margins and short-term issues at Hilton should not distract from the group's ability to consistently deliver through the cycle, with high-volume turns enabling it to generate "exceptional returns on capital".

"Following a recent trip to Australasia to see some of the group's assets, we are confident that Hilton can both deepen its relationship with existing customers, and roll out its offering in more geographies," said Berenberg.

"Although underlying volumes in its core business have been affected by a channel rebalancing and a softening consumer outlook, we think Hilton has a number of levers to offset this over the next few years."

Berenberg added that on its full-year 2023 estimates, Hilton trades on an 8.5% free cash flow yield and on 11.0x IFRS-16 adjusted earnings. Its discounted cash flow-based price target implied a price-to-earnings multiple of 15.0x.

Reporting by Iain Gilbert at Sharecast.com