Liberum upgrades Cranswick following recent price drop
By Iain Gilbert
Date: Thursday 10 Jan 2019
(Sharecast News) - Analysts at Liberum upgraded UK food producer Cranswick to 'buy' on Thursday after the group's recent 20% drop had brought its shares back below its five-year price/earnings ratio for the first time in two years.
While the broker noted the next twelve months could very well bring some "challenging UK trading conditions" as a result of Brexit related concerns and an increased difficulty in gaining market share in the UK pork market, Liberum expects some of these woes to be offset from higher export profits as demand and prices begin to reflect a growing supply shortage in China as a result of the recent African Swine Fever outbreak.
However, Liberum noted, critical to its upgrade, was that Cranswick shares looked set to increasingly anticipate a new wave of higher earnings per share growth ahead of the commissioning of its new 1.2m bird per week poultry plant in 2020.
Liberum noted: "This is phase 1 of Cranswick's investment ambitions to raise its UK poultry market share (currently just 3%) which doubles existing capacity, gives scope to lift revenue per bird and should lower unit costs of production."
The broker, which kept its 3,300p target price unchanged, praised Cranswick for delivering "one of the most enviable track records in the UK of shareholder value creation" but acknowledged that the next twelve months were "likely to bring only low single-digit earnings growth".
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