Citi has raised its price target for Associated British Foods PLC (LSE:ABF), the Primark owner, to £15.50 from £13.30 while retaining a sell rating, as it takes a more constructive view of the sugar business.
The broker expects sugar to be less of a drag on earnings than previously forecast, with adjusted operating profit estimates raised by £35 million for the financial year ending in September 2026 and £71 million for 2027.
It expects the sugar division to post an adjusted operating loss of about £35 million in 2026, improving to a £3 million profit in 2027, compared with previous forecasts for losses of £48 million and £68 million respectively.
The changes reflect higher sugar price assumptions and the timing of the impact from a currency devaluation in Malawi, with about £25 million of the effect now expected to fall into the 2027 financial year rather than 2026.
Citi expects Primark, Associated British Foods’ largest business, to remain broadly in line with consensus expectations, with the retailer also benefiting from changes to European Union low-value import rules in the fourth quarter.
The broker expects the acquisition of Hovis to be marginally dilutive to earnings in 2027, while its revised sum-of-the-parts valuation supports the higher £15.50 target.
Associated British Foods is due to provide a trading update on Thursday, with investors watching for further evidence on Primark’s performance and the outlook for sugar.