Deutsche Bank has turned sour on food Tate & Lyle PLC (LON:TATE), downgrading its rating as it thinks there is “no quick fix” for the turnaround of the group’s Specialty Food Ingredients business.
The German bank has cuts its stance on the FTSE 250-listed firm to ‘hold’ from ‘buy’ and reduced its target price for the stock to 725p from 875p.
In early morning trading, Tate & Lyle shares were down 1.2%, or 8p at 666p.
In a note to clients, Deutsche’s analsysts pointed out: “Tate's ‘core"’Specialty Food Ingredients (SFI) business represents 54% of group's profits and is facing structural challenges due to the lack of growth at the large food & beverages companies, which happen to be Tate's key customer base.”
They added: “Tate's valuation (15x 2017/18E P/E) does not look expensive compared to food manufacturing and ingredients peers.
“However, with nearly half of Tate’s profits coming from commodities (currently generating high cycle profits) and the core SFI business likely to remain challenged for the foreseeable future due to structural issues that will take time to be fixed, we see no catalyst for outperformance and downgrade to Hold.”