Credit Suisse ups target on Associated British Foods

22nd Feb 2016 12:43

(ShareCast News) - Credit Suisse boosted its target price on shares of Primark-owner Associated British Foods following what it termed a "reassuring update" from the company, while its recommendation was kept at 'outperform'.Analysts Charlie Mills, Alan Erskine, Molly Eggleton and Faham Baig highlighted upwardly-revised guidance from the ingredients producer from a forecast for full-year earnings to post a "modest decline" to a "marginal decline" now.That led Mills and his team to raise their target price, derived from a blend of using the adjusted-present-value and and sum-of-the-parts valuation methods, from 3250p to 3450p.The analysts said trading had edged past their forecasts in Sugar, Primark and Ingredients."After several years of downgrades the group looks to be turning a corner?," they asked.Like-for-like sales at its Primark unit were back to flat for the first 24 weeks, they estimated, versus a decline of 0.5% over the first 16 weeks.Margins also "looked better" at down by 110 basis points on their calculations.Good 'spot' prices in sugar would feed-through into profits in China and Spain.The turnaround seen over the last two years in the profitability of its ingredients arm was also continuing, the Swiss broker told clients in a research note."All-in-all, an encouraging update from ABF with H1 operating profits modestly ahead of last year, which is a touch better than we initially had."