Broker tips: Bakkavor, Accsys Technologies

(Sharecast News) - Analysts at Berenberg lowered their target price on food manufacturing group Bakkavor from 110.0p to 95.0p on Tuesday, citing a lower earnings trajectory. Berenberg stated that despite "significant headwinds", Bakkavor had reported a "resilient" set of interim results last week, with volumes remaining "steady", pricing gains helping offset mounting inflation, and internal costs remaining broadly flat.

However, the German bank stated that pressures were "not easing" and that Bakkavor was already utilising many of its "self-help levers".

"We think that profit growth will be limited in the near term; therefore, we think that there is limited scope for equity outperformance until pressures subside," said the analysts, who reiterated their 'hold' rating on the stock.

With that in mind, Berenberg added that while the UK appears to be challenging, it continues to be encouraged by Bakkavor's US performance, which recorded 35% like-for-like revenue growth in the first half - driven by volume growth in fresh meals, which continues to deliver an improving rate of sale.

"Meanwhile, margins in the US were hamstrung by cost inflation (EBITDA down 9% on reported revenue that was up 43%) - Bakkavor has negotiated improved pricing, which will help the segment deliver an improved profit performance in H2. Furthermore, scope for medium-term distribution gains are large, albeit constrained in the near term by capacity challenges," Berenberg added.

Analysts at Canaccord Genuity lowered their target price on wooden products retailer Accsys Technologies from 190.0p to 150.0p on Tuesday, citing delays to the group's new Tricoya plant.

Canaccord Genuity said it had opted to revise its target price on the stock following the announcement that completion of Accsys' new plant in Hull had been impacted by "successive revisions to timelines" relating to reworking, Covid-19, and the termination of the lead engineering, procurement and construction contractor.

The Canadian bank said that June's trading update from Accsys had detailed a focus on plant commissioning, with operation in "the coming months". However, it said the latest trading update had confirmed that progress had continued at a slower pace than anticipated, with reduced activity on site and a focus on reducing costs by the consortium of partners.

"Operational activity is now not expected in 2022, shifting our forecasts to the right," said the analysts

However, Canaccord, which stood by its 'buy' rating on the stock, acknowledged that manufacturing of and trading in its core Accoya product unit had remained "highly robust", and said it remains confident in both near-term cash flows and the stock's long-term story.

Reporting by Iain Gilbert at Sharecast.com