The Restaurant Group PLC (LSE:RTN) (TRG), owner of Wagamama, could see its share price begin to lift once again after the hospitality group struggled post-Covid, research from Deutsche Bank AG (NYSE:DB) found.
Analysts at the bank upgraded the group’s ranking from ‘hold’ to ‘buy’ and increased the price target from 42p to 56.5p.
The German bank said: “We believe we are at the end of the downgrade cycle for TRG.”
A key driver for the upgrade has been the improving sales growth in 2023 as every month has experienced a year-on-year rise – most impressively a 10.3% jump in January and 7.6% in April, according to CGA figures.
Deutsche Bank noted that current data still shows negative volume growth for TRG, highlighting the impact of price increases.
In the second half of 2023, the lender sees “scope for volume recovery” that should outperform the increase in wages and “headline inflation”.
Additionally, the ten percent hike to the national living wage that came into effect in April is expected to help boost disposable incomes and consumer confidence in the UK.
The hospitality group’s principal brand, Wagamama, leads the way in terms of growth, jumping by 9% in April, according to Deutsche Bank.
Just behind at an 8% growth rate in April was the group’s pub brands which include Brunning & Price, one of the top operators in the UK.
However, TRG’s concessions and leisure divisions still appear to be struggling to develop growth momentum, the bank added.
Brands like Frankie & Benny’s and Chiquito have been at the forefront of activist investors' concerns with several shareholders calling for a spin-off of all brands bar Wagamama.