 Liberum upgrades Fevertree on recovery prospects
Liberum has upgraded premium mixer maker Fevertree (FEVR) as a trough in margins indicates a recovery in this year and next.
Analyst Anubhav Malhotra upgraded his recommendation from ‘hold’ to ‘buy’ and increased the target price from £12.00 to £13.00 on the stock, which was trading at £9.98 on Monday.
Malhotra said the company’s strategy ‘has been focused on market share gains against a backdrop of significant input cost inflation over the last two years’.
Margins have ‘troughed̵7; after a 20-percentage point gross margin decline over the last three-and-a-half years, making room for recovery.
‘We see scope for a greater recovery in 2024 and 2025 than consensus expects and therefore move to ‘buy’230; but we note that the top line is likely to remain subdued,’ Malhotra said.
‘Despite the [fact] that ‘bad news’ might not be over, the valuation at 17x 12 months forward consensus embedded value/Ebitda and 28x price/earnings – 40-50% below historic average – looks reasonable.’
Mahotra said that for investors ‘wanting to build a position, now is the time considering the low average daily volume of 265,000’.
citywire.com |
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