The Magnum Ice Cream Company (EURONEXT:MICC, LSE:MICC, NYSE:MICC) could plausibly grow between 3% and 4% per year, according to Deutsche Bank, though the German bank stops short of bullishness.
DB has begun its coverage of the spun-out ice cream brand with a 'Hold' rating, and a target price of EUR14.50 (versus a prevailing market price of around EUR14.24).
Analysts at DB cautioned that ice cream remains seasonal and more volatile than other consumer staples. The bank noted that emerging markets remain an opportunity, though exposure to Turkey, accounting for 8% of sales, carries currency risk due to inflation.
DB reckons the company could gain market share, but said the rise of digital commerce is likely to support competition from smaller brands with stronger distribution. Falling raw material costs are expected to support gross margin improvement and future investment.
Magnum is expected to be benchmarked against other seasonal staples including brewers such as AB InBev and Heineken. Deutsche Bank expects the shares to trade in a range of 7 to 9 times EV/EBITDA, implying a valuation band between EUR11.00 and EUR15.00.