On Monday, Barclays (LON:BARC) adjusted its stance on Royal Unibrew (CSE:RBREW:DC) (OTC: ROYUF), downgrading the stock rating from Overweight to Equalweight and reducing the price target to DKK 653.00 from the previous DKK 694.00. The shift in rating by Barclays reflects concerns about the company's competitive positioning in the European PEP bottling market.
Analysts at Barclays have identified two main structural disadvantages for Royal Unibrew. Firstly, within its current geographical markets, there appears to be a limited opportunity for the company to secure PEP contracts in neighboring regions.
Secondly, in other European areas where PEP may seek to re-franchise its bottling operations, Carlsberg (CSE:CARLb) is deemed to be more favorably positioned due to its stronger beer market presence.
Barclays also expressed skepticism regarding the company's operating profit growth forecasts for FY25E, which are set at +9.5%. The analysts view these expectations as optimistic and leaning towards the upper end of potential outcomes, particularly in the absence of further mergers and acquisitions.
The analysis by Barclays concludes that with the limited potential for a re-rating of the stock and the unlikelihood of double-digit operating profit growth, Royal Unibrew's chances for stock outperformance are considered challenging. This has led to the decision to downgrade the company's stock to Equalweight.
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