Unilever PLC (LSE:ULVR) investor day for its ice cream arm put Magnum in the spotlight, with management setting out plans to sharpen marketing and make more of “consumption occasions”.
The company also promised gains from productivity improvements.
It was a tidy presentation, but Deutsche Bank says the numbers do not justify any big change in how investors value the business.
The bank reckons the ice cream unit, which is due to be spun off in November, should trade on 7 to 9 times 2027 earnings before interest, tax, depreciation and amortisation (EBITDA), compared with the wider Unilever group on 11 times.
At the midpoint of that range, 8 times, Magnum would deliver a free cash flow yield of about 7.5% in 2027.
The sticking points are the quirks of the business itself. Ice cream is seasonal, and depreciation eats up a chunky 39% of adjusted profits, leaving earnings more volatile than at other divisions. That makes it hard to see investors paying up for a richer rating any time soon.
Deutsche Bank maintained its “buy” rating with a 5,100p price target.