Broker snap: Cranswick beats forecasts but valuation 'fair', says Panmure

25th Nov 2013 10:38

Panmure Gordon has reiterated its 'hold' rating for pork producer Cranswick despite a better-than-expected first-half report, saying that the stock's current valuation looks 'fair'.As previously reported, revenues rose 15% in the six months to the end of September to £483.5m, helped by particularly strong growth in sales of fresh pork and bacon.Meanwhile, adjusted operating profits rose 4% year-on-year to £23.6m, ahead of Panmure's £22.8m estimate due to a lower tax charge. Adjusted earnings per share were up 7% at 38.3p, above the 35.2p forecast.However, the operating margin fell 60 basis points to 3.9% due to rising UK pig prices which remain close to record levels of 171p per kilogram. An "improved operational performance" was able to partly offset this though, the broker said."The UK pork price is expected to remain close to record levels [...] at least until Christmas but we expect an improved margin performance in H2 2014 as the company recovers costs and continues to deliver operational efficiency improvements."As such, Panmure has kept its full-year forecasts and is looking for a flat adjusted profit before tax of £49m for the 12 months ending March 31st 2014."Cranswick's shares have risen by 34% and have outperformed the wider UK market by 19% year to date. "The shares are trading on 13.1 times earnings [...] for CY 2014, broadly in line with its peer group. We maintain our 'hold' recommendation and 1,140p price target."The stock was up 4.45% at 1,149p by 10:47.BC