Associated British Foods (LSE:ABF), the diversified group that owns Primark, saw Deutsche Bank cut its price target to 1850p from 1925p and reiterate a Hold, with analyst Adam Cochrane describing the stock remains an "interesting investment case".
It comes after recently lowered guidance and a valuation trading around c.11x PE with the share price back at 2013 levels, and Cochrane warns of the risk of further like‑for‑like weakness at Primark and potential gross margin pressure as inflation is not fully passed through to consumers.
He expects this will keep sentiment subdued and mute any excitement around a planned Primark demerger until LFLs improve.
DB also highlights that lower sugar prices render the European sugar businesses unattractive for now (although prices may have troughed) and says the grocery division must deliver the margin improvements management guided for in the second half, with the shares last closing at 1836p.
The bank, meanwhile, flags Primark's like‑for‑like sales as the next key proof point for the investment case, with grocery's 2H margin delivery the operational milestone to watch.
