Mitchells & Butlers PLC (LSE:MAB), the Miller & Carter owner, is expected to benefit from lower costs and an improved balance sheet, analysts predicted on Tuesday.
Deutsche Bank analysts upgraded the hospitality group’s share price target from 320p to 360p following its interim results last week.
In the six months to April 13, the Harvester owner posted pre-tax profits of £108 million, up from the £40 million a year prior.
Analysts said one reason for the upgrade was because the group’s long-standing pension deficit was de-risked, with a windfall in cash partially offsetting its contributions.
An additional £35 million – 6p per share – was returned to the company after having been held in escrow from historic pension contributions.
Deutsche Bank also noted how the pub and restaurant firm is close to covering the £140 million in annual debt amortisation through its free cash flow.
“Operationally, the business is also performing well: like-for-like sales growth of 7% is running ahead of cost inflation,” analysts explained.
Food and beverage inflation is now predicted to slow to a mid-single-digit, with the only headwinds to costs being wage hikes.
“Based on the improved cost outlook, we raise our EBIT forecasts by 5% for 2024 and 3% for 2025,” Deutsche Bank said.
Analysts therefore rated the stock a buy, with their new target price reflecting close to a 20% premium to its current market value.