Shares in Associated British Foods PLC (LSE:ABF), the company behind Primark and Silver Spoon sugar, were up strongly after it got a thumbs-up from analysts at Panmure Liberum, who upgraded their recommendation on the shares from 'hold' to 'buy'.
They also raised their share price target from 1,900p to 2,600p, suggesting there's about 26% upside from the current price of around 2059p.
ABF has long frustrated investors because profits from its Sugar division swing wildly, making it tricky for investors to feel confident.
However, the Panmure number crunchers say the company has tackled many of these problems head-on, cutting costs, fixing trouble spots, and opening new operations.
They expect ABF’s sugar business to turn around from a loss this year to a healthy profit in 2026, far quicker than the market currently expects.
Meanwhile, Primark, which struggled a bit earlier this year with declining sales, is set for a bounce-back in the coming months.
Lower costs, smarter buying decisions, and favourable exchange rates mean Primark could surprise positively, boosting profits nicely.
ABF’s shares currently look cheap compared to their historical levels, trading around 40% lower than their average valuation over the past decade.
According to Panmure, this makes ABF attractive even if the Sugar business stays part of the group. But, they say, spinning it off as a separate company could unlock even more value for investors.
Overall, Panmure Liberum expects strong earnings growth and solid returns for ABF investors over the next few years, thanks to improving profits and steady dividends.
Investors will get more clarity in ABF’s full-year trading update in September, followed by full-year results in November.
The shares rose 3.6% to 2,121p.