Panmure Liberum has raised its target price for MP Evans Group PLC (AIM:MPE) from 1,450p to 1,600p and reiterated its 'buy' rating, citing stronger palm oil prices, higher profitability, and robust cash generation.
The shares closed at 1,320p, giving the group a market value of about £700 million.
Palm oil prices have climbed by roughly 20% since June, pushing mill-gate prices ahead of previous forecasts. That has prompted the broker to increase its pre-tax profit estimates by 5% for 2025 and 7% for 2026.
Free cash flow is now expected to reach $117 million next year and $108 million in 2026, with the company forecast to end 2025 holding $89 million in net cash.
Underlying this optimism is a tighter supply-demand balance in the palm oil market. Indonesia has raised the proportion of palm oil used in biofuel from 40% to 50%, while a moratorium on new plantation development limits future supply.
Given it takes about a decade for new palms to mature, Panmure Liberum expects prices to remain well supported. MPE, with estates averaging 11 years of age, is well-positioned to benefit as its trees move into peak production.
Operationally, the group’s investment in milling capacity is beginning to pay off. It can now process about 95% of its crop internally, reducing reliance on pricier third-party mills and improving margins.
At the same time, the company is cutting back on lower-quality third-party fruit, further boosting efficiency. The broker forecasts an increase in operating margin to 37% this year from 33% in 2024.
Valuation remains undemanding, in Panmure’s view. The shares trade on nine times 2026 forecast earnings, yielding around 4%, with dividend cover of 3.6 times and a free cash flow yield close to 12%.
The target price of 1,600p reflects the mid-point between a discounted cash flow valuation of 1,746p per share and a sum-of-the-parts estimate of 1,465p.
With palm oil prices likely to stay firm and cash generation strong, MPE looks set to keep rewarding patient shareholders, and perhaps justify its latest round of upgrades.