Credit Suisse raises ABF target price, highlights margins and valuation
Associated British Foods
2,188.00p
17:15 18/11/24
Analysts at Credit Suisse bumped up their target price for shares of Associated British Foods, highlighting the potential for the introduction of a 'Click and Collect' model and the likely boost to earnings from currency tailwinds alongside an 'attractive' entry point in valuation terms.
Food Producers & Processors
7,925.70
17:09 18/11/24
FTSE 100
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16:35 18/11/24
FTSE 350
4,473.50
17:09 18/11/24
FTSE All-Share
4,431.13
16:49 18/11/24
Foremost, they highlighted the company's sustainable cost advantage versus peers and then went on to explain how introduction of an online 'Click and Collect' model might boost the firm's margins and sales.
As for the impact from currency swings, the Swiss broker believed it would be premature to look for a positive impact from dollar weakness on the company's EBIT margins.
"Currency impact is still to fully work through, mark-downs were abnormally low this year, Primark traditionally reinvests in price, and the US is still in investment phase," they said.
However, those FX tailwinds would help when translating its Primark arm's profits from overseas into Sterling, which led the broker to bump up its 2016/18 estimates of retail by roughly 4%.
Weakness in Sterling versus the single currency would also boost the company's sugar profits by 6%, it said.
Finally, trading on about 29 times earnings, down from 40 times two years ago, Credit Suisse believed the present share price presented a "good" entry point given the ABF's structural growth story.
Ahead of the firm's 11 September trading update, Credit Suisse raised its target price on ABF from 3,350p to 3,600p while reiterating its 'outperform' rating.