Associated British Foods PLC 

Associated British Foods PLC (LSE: ABF) listed on FTSE 100 index is a varied enterprise with multiple food and ingredient-related businesses. Its divisions encompass Grocery, Ingredients, Agriculture, Sugar, and Retail. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 2,194.00

• Resistance near Current levels: ABF’s stock price almost touched Resistance (R2) which was stated in the previous report on 24 January 2025 therefore, there can be a possibility of a decline from resistance levels. Considering the market conditions and the price action, it is prudent to exit the stock.
• Group Revenue Declined at Actual Currency: Despite modest growth of +0.5% at constant currency, Group revenue fell -2.2% at actual currency to GBP 6,732mn (Q1 FY25), highlighting adverse currency impacts across the business.
• Primark’s UK and Ireland Sales Dropped 4%: The UK and Ireland, which account for ~45% of Primark’s total sales, saw a 4% decline in sales and a 6.0% drop in like-for-like sales in Q1 FY25, with Primark’s UK market share falling slightly to 6.8%, impacted by weak consumer sentiment and a mild autumn.
• Flat to Weak Growth in Key Grocery and Ingredients Brands: Grocery revenue grew just +0.8% at constant currency during Q1 FY25, with sales in UK-focused Allied Bakeries declining and US brand performance only in line with expectations. In Ingredients, overall sales growth of +3.5% was dampened by softer performance in the pharmaceutical business within the speciality ingredients portfolio.
• Macroeconomic Risk: The market sentiments can remain weak in the short term due to the subdued consumer disposable income, geopolitical tensions, and political risks.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

ABF is likely to trade at a discount, given the -2.1% constant currency revenue decline in its Sugar and Agriculture segments in Q1 FY25, flat to subdued performance in core Grocery and Ingredients divisions, a -2.2% drop in Group revenue at actual currency to GBP 6,732mn, and ongoing uncertainty surrounding the macroeconomic environment and inflationary pressures. For conducting the valuation, the following peers have been considered: Next PLC (LSE: NXT), Marks and Spencer Group PLC (LSE: MKS), etc.

Given its current trading levels, the overstretched valuations, geopolitical tension, trade war escalations, economic slowdown, decline in purchasing power of the customers etc, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the Closing Market Price of GBX 2,194.00 as of 17 April 2025.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 17 April  2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.