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Investing.com -- Analysts at Citi research in a note dated Friday upgraded Tate & Lyle (LON:TATE) to "buy" from “neutral” rating, with analysts citing an attractive risk-reward balance and a misalignment between the company’s valuation and its ongoing portfolio transformation. The brokerage raised its price target to £6.70 from £6.10.
They attribute this valuation lag to market concerns over elasticity metrics, which they believe may be misleading.
According to the brokerage, these metrics have been distorted by recent contract cycles and do not adequately reflect volume and mix contributions, areas that the company has underreported.
Citi sees the potential for this perception to shift following the company’s Capital Markets Day in July.
The analysts say that event could clarify how the “new Tate” has secured broader access to reformulation opportunities, such as sugar reduction and plant-based ingredient solutions.
They believe demonstrating this access would underscore the company’s ability to decouple from end-market demand fluctuations and support medium-term earnings growth.
The brokerage adds that Tate & Lyle’s transition efforts have already resolved some of the structural limitations of its legacy research and development platform, which may have previously excluded it from certain reformulation discussions.
Citi expects that, by post–fiscal year 2026, the company could deliver an EBITDA growth algorithm of about 8% between fiscal years 2027 and 2029, driven by solution-based selling, synergies, and potential expansion into areas like home and personal care.
Analysts also view downside risks to fiscal 2025 earnings as limited and forecast a 4–6% like-for-like EBITDA growth for fiscal 2026.
Even after trimming their earnings per share estimates for fiscal years 2025 to 2027 by 2.2% annually, Citi maintains that the company offers meaningful upside potential.
They also flag optionality for share buybacks post–fiscal year 2026, estimating up to £100 million per year as feasible.