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On Friday, Citi analysts, led by Cedric Besnard, upgraded Tate & Lyle Plc (LON:TATE:LN) (OTC:TATYY) stock rating from Neutral to Buy and increased the price target to £6.70 from £6.10. The upgrade reflects a positive outlook on the company’s strategic shift away from commoditization and towards securing a larger share of the reformulation profit pool.
Tate & Lyle, a global provider of food and beverage ingredients, has been undergoing a portfolio migration aimed at decoupling from weaker end-markets and aligning more closely with profitable reformulation trends. Besnard suggests that the market has undervalued Tate & Lyle due to potentially misleading elasticity metrics, which might be corrected during the company’s Capital Markets Day in July.
The analyst anticipates that at this event, Tate & Lyle will demonstrate how its transformation has allowed it to gain broader access to the reformulation profit pool, which is expected to support a 7-9% EBITDA growth algorithm post the FY26 transition. This potential for growth and the closing of the valuation gap with peers were key factors in the upgraded rating and price target.
Citi’s analysis also points to limited downside risk to the company’s FY25 earnings and the possibility of share buyback optionality post-FY26, with a feasible £100 million per annum. The combination of these factors has led to a more bullish stance on Tate & Lyle’s stock by the firm.
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