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Proactive Investors – Mitchells & Butlers PLC (LON:MAB), the Miller & Carter owner, is expected to benefit from lower costs and an improved balance sheet, analysts predicted on Tuesday.
Deutsche Bank (ETR:DBKGn) analysts upgraded the hospitality group’s share price target from 320p to 360p following its interim results last week.
In the six months to April 13, the Harvester owner posted pre-tax profits of £108 million, up from the £40 million a year prior.
Analysts said one reason for the upgrade was because the group’s long-standing pension deficit was de-risked, with a windfall in cash partially offsetting its contributions.
An additional £35 million – 6p per share – was returned to the company after having been held in escrow from historic pension contributions.
Deutsche Bank also noted how the pub and restaurant firm is close to covering the £140 million in annual debt amortisation through its free cash flow.
“Operationally, the business is also performing well: like-for-like sales growth of 7% is running ahead of cost inflation,” analysts explained.
Food and beverage inflation is now predicted to slow to a mid-single digit, with the only headwinds to costs being wage hikes.
“Based on the improved cost outlook, we raise our EBIT forecasts by 5% for 2024 and 3% for 2025,” Deutsche Bank said.
Analysts therefore rated the stock a buy, with their new target price reflecting close to a 20% premium to its current market value.
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