Berenberg downgrades Tate & Lyle to 'hold', slashes price target
By Michele Maatouk
Date: Wednesday 19 Feb 2025
(Sharecast News) - Berenberg downgraded Tate & Lyle on Wednesday to 'hold' from 'buy' and slashed the price target to 600p from 900p as it said the shares were lacking a catalyst.
Tate said in a trading statement on 13 February that revenue for the year to the end of March was set to be mid-single digit percent lower and EBITDA growth was set to be towards the lower end of its guidance range of 4% to 7%. It pointed to continued geopolitical uncertainties and some pricing pressure.
"With no signs of a near-term improvement in pricing conditions or volume outlook for Tate & Lyle, we reduce our price target to GBp600 and downgrade our rating to hold," Berenberg said in a research note.
It said that following the trading statement, it now forecasts 3% price/mix declines for the Food & Beverage Solutions (FBS) division and the CP Kelco acquisition, with 5% volume growth in both businesses leading to 2% organic growth.
"We do not expect Tate to benefit from meaningful raw material deflation, which combined with negative pricing, points to margin contraction in FY 2026," it said.
"However, we believe this will be more than offset by the contribution from cost savings associated with CP Kelco; we forecast an FY 2026 EBITDA margin of 21.4% (+70bp yoy)."
Berenberg said the new price target price implies a FY 2026 price-to-earnings multiple of 12.2x, "reflecting the limited near-term growth opportunities".
At 1230 GMT, the shares were down 2.4% at 540.30p.
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