Deutsche Bank has increased its price target for AG Barr PLC (LSE:BAG), the maker of Irn Bru and Tizer, from 685p to 760p, citing operational improvements and progress in boosting profit margins. The bank maintains a "buy" recommendation on the stock.
Analysts highlighted that AG Barr performed well in the first half of the year, despite challenges such as poor summer weather and difficulties in the UK pub and restaurant sector.
The company’s core soft drinks division grew by 7%, significantly outpacing the overall market growth of 2%. This success was driven by new product launches, wider distribution, and effective marketing investments.
AG Barr’s strategy to improve profit margins is progressing as planned, giving the German bank confidence in the company’s long-term outlook.
The company is targeting mid-single-digit revenue growth (around 4-6%), operating profit margins in the mid-teens (around 15%), and a return on capital employed (ROCE) of 20% over the medium term. ROCE is a measure of how efficiently a company uses its capital to generate profits.
Deutsche has slightly adjusted its longer-term sales growth forecasts to 4.5% while leaving near-term estimates unchanged. These projections contribute to the raised price target. The bank also introduced forecasts for 2029 into its model.
Currently, AG Barr shares are trading at 15.5 times their expected earnings for 2025, and at 8.5 times enterprise value to earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA)—a common measure of a company’s overall financial performance.
Deutsche remains optimistic about AG Barr’s potential for future growth, particularly as its margin improvement plan continues to deliver results.
Ahead of the closing bell, the shares were up 1% at 616p.