Premier Foods PLC, the owner of Mr Kipling, is grossly undervalued according to house broker, Shore Capital, commenting after the group’s first half results today.
In a high inflation market where volumes are under pressure the group delivered revenue growth of 6.2% with quarter two coming at 6.4%.
Branded sales had slightly slower momentum at 3.9% in the half whilst International revenues advanced 11%.
“Inflation has been left, right and centre for the food system and so we are pleased to see stable year-on-year gross margins from Premier in the first half with input price pressures said to be offset by price recovery and cost savings initiatives” the broker said.
Shore said Premier Foods has evolved into a “high-class act with a highly competent management team delivering quarter after quarter of good trading performance.”
“We sense that quarter three is going to plan after the small first half beat, which leaves us increasingly confident that our full year 2023 estimates will be achieved.”
Overall, Shore felt that the group on a full year 2023 PER of 9.5x and EV/EBITDA multiple of 7.5x, remains fundamentally undervalued.
“Put another way, as cautious analysts, we believe that we should be revisiting such an assertion with 40-50% share price appreciation” it concluded.