Deutsche Bank sees a potential sale of Tesco's (LSE:TSCO) Central Europe business as margin-accretive and strategically logical.
The German bank's London-based analysts have repeated a Buy rating, with a 525p price target implying roughly 12% upside to the last close of 467.5p.
DB analyst Benjamin Yokyong-Zoega, noted a recent FT report which claimed that Tesco is exploring a disposal of its Central Europe operations, a move which the stockbroker reckons would be consistent with the UK's largest grocer progressively exiting international markets
This strategy is simplifying the group structure, improving margins and reducing regulatory exposure, with capital redeployed into the UK core, the analyst added.
Yokyong-Zoega, meanwhile, also noted that the outcome remains unconfirmed but characterises it as unsurprising given ongoing profitability challenges in Hungary, regional market shares, and the strategic options.
In the note, the analyst described Tesco as "a top pick" for UK retail, and noted that the supermarket chain currently trades on 16 times calendar 2027 estimated price-to-earnings, and has a 6% free cash flow yield.
