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Cranswick churns out sausages at top speed as coronavirus drives up prices

Published: 16:18 30 Mar 2020 BST

Cranswick PLC -
Cranswick makes fresh pork and chicken, gourmet sausages and cooked meats

Cranswick PLC (LON:CWK) is likely to be benefitting from the surge in demand for food through UK retailers amid the coronavirus lockdown, as well as from higher prices and demand for pork in China, analysts reckon. 

Predicting these benefits will last a while, broker Peel Hunt said that even though the shares are highly rates and there is some forecast risk, it was upgrading its rating to ‘buy’ from ‘hold’ and upping its share price target to 4,000p from 3,200p.

“Schools are unlikely to return until autumn and summer holidays are likely to be spent at home, which means demand through retailers will remain high,” the Peel Hunt analysts said in a note to clients.

Over at Liberum, analysts also seemed to have picked up that Cranswick “continues to trade well” in its core UK market amidst high consumer demand for staple protein sources of sausages, bacon, ham and chicken. 

”With food and farming deemed essential by the government during the coronavirus crisis, all of Cranswick's facilities are running at high operating rates, the Liberum analysts said in a separate note on Monday. 

The FTSE 250 company is ramping up its new poultry facility as planned and “should be at full capacity soon” and supply chains for imported goods are “holding up well”, the Liberum analysts said.

Liberum kept its ‘buy’ recommendation and its target price at 3,800p.

Porky prices as China demand remains high

The demand increase has not just been in the UK but worldwide, the Peel Hunt analysts noted, observing that Brazilian protein colossus JBS has stated it is doing all it can to keep production levels high.

“The worldwide demand for protein will mean China remains short of pork for a longer period than envisaged originally,” the Peel Hunt analysts said.

Analysts said that while the sow herd in China is rebuilding rapidly after the outbreak of African Swine Fever last year, “this has a long way to go before returning to previous supply levels” as the gestation and growing period lasts at least 12 months and so the slaughter capacity will only come through next year.

“We had assumed that world production would increase to fill the hole in Chinese supply. Clearly, there is now increased demand for protein around the world.”

The China pig price spiked last summer and started to drop in the winter, but has increased since the coronavirus outbreak, so is now likely to stay stronger for longer.

Pork exports to China are “picking up strongly after a temporary lull post the Chinese New Year and coronavirus-related disruption”, Liberum confirmed. 

With Cranswick’s shares being one of the rare few in the entire London market to be in a positive position this year, Liberum felt the high relative valuation is a risk, “but likely strong FY results in May, a robust balance sheet and a resilient business model should keep the shares a safe haven”.  

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