Palm oil producer MP Evans Group PLC (AIM:MPE) is showing the fruits of its long-term investment programme.
Panmure Liberum has raised its price target from 1,260p to 1,450p and reiterated a 'buy' recommendation after a strong set of interim results.
Full-year profit before tax is now expected to come in at $137 million, up from a previous forecast of $113 million, implying growth of 18%.
Cash generation has also impressed, with net cash forecast to rise from $46 million at the end of 2024 to $82 million by December.
That leaves the group trading on about nine times expected 2025 earnings, with a dividend yield of 4.4% and free cash flow topping $100 million a year.
One driver is the greater reliance on its own harvests. The company has doubled its number of mills to six, giving it the capacity to process almost all of its crop internally.
At the same time, it is cutting back on the amount of fruit bought from third parties, which is both pricier and lower quality.
As a result, margins are set to expand, with Panmure Liberum forecasting an operating margin of 36% this year, up from 33% in 2024.
Higher prices for crude palm oil and palm kernel, along with lower production costs, have provided a further boost. The board underlined its confidence with a 20% increase in the interim dividend, continuing a 35-year record of at least maintaining the payout.
Plantations are relatively young, averaging 10 to 11 years old, and new acquisitions in recent years should extend productive life well into the next decade.
On top of this, the group is improving its sustainability credentials: five of its six mills are already certified by the Roundtable on Sustainable Palm Oil, with the final one expected this year.
That certification allows the company to command premium pricing, a potential advantage ahead of tighter European import rules in 2026.
The shares rose 3% at 1,337.05p.