JP Morgan cuts target on Dairy Crest but keeps at overweight

22nd Sep 2014 15:30

Despite the losses incurred at its Dairies division during the first half of fiscal year 2015, resulting from declines in milk prices and cream prices, Dairy Crest has the opportunity to drive growth over the medium-to-longer-term through the management and development of its flagship brands.Hence, while volatility in that part of the business exposed to diary processing is expected to continue analysts at JP Morgan think the current multiples on which the shares are trading are "undemanding".That is particularly so in light of the 6% dividend yield, it adds.As well, the benefit of recent farmgate price cuts will materialise in the second half and the comany did see steady growth at its four flagship brands.For all of the above reasons the broker has kept its 'overweight' recommendation on the shares although it has lowered its price target to 480p from 530p beforehand.