Berenberg initiated coverage of Greencore Group (LON:GNC) on Monday, assigning a Buy rating and a price target of 351p. The research house pointed to the company’s strengthened medium-term growth outlook linked to its acquisition of Bakkavor and Greencore’s standing in the UK convenience foods sector.
The broker described Greencore as a leading manufacturer in the UK convenience food market and said the firm is well placed to capture structural demand in the food-to-go segment. Berenberg published a set of financial expectations alongside its initiation: a 14% compound annual growth rate in earnings per share over three years, and a forecasted FY27E price-to-earnings multiple of 11x. The firm also cited a projected free cash flow yield of 7.3% for FY27E.
In Berenberg’s assessment, the acquisition of Bakkavor materially strengthens Greencore’s competitive position. The deal is said to broaden Greencore’s relationships with grocery retailers, enhance its buying power and accelerate capabilities in new product development. The research note anticipates that the enlarged group will be able to lock out rivals in potential request-for-proposal (RFP) processes and convert that advantage into new business wins.
The acquisition is also described as expanding Greencore’s total addressable market against several structural trends. Berenberg listed these trends as increasing consumer preference for convenience food, return-to-office patterns that support food-to-go demand, consumer trading down toward value options, and a rising appetite for healthier food choices. The analyst house expects these dynamics to underpin improved revenue growth prospects for Greencore.
On margins, Berenberg projects Greencore’s operating margins to rise above 7% in FY28. The note allows for further upside from cost synergies, while observing that management’s current guidance for synergies sits toward the low end of historical sector averages for large-scale mergers and acquisitions. Finally, Berenberg expects Greencore to move toward a net-cash position by FY30, a shift that the research house says would create scope for further acquisitions or shareholder returns.