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(Sharecast News) - Shore Capital upgraded drinks maker C&C Group to 'buy' from 'hold' on Friday as it highlighted a depressed valuation and said that with Omicron concerns easing and hospitality reopening, the key on-trade channel should continue to improve over the coming months.
The broker also said that C&C's trading update earlier this week pointed to a better-than-expected outturn for FY22 than previously feared.
"Given the current depressed valuation, relief over the potential impact from Omicron and the numerous levers the group has to manage cost inflation, we take this opportunity to upgrade," it said.
ShoreCap noted that with Covid-related restrictions lifted, including Ireland, the hospitality industry is reopening, restocking and delivering.
"The key to the investment case is recovering cost inflationary pressures and returning profitability to pre-Covid levels, which we forecast in FY24F.
"Beyond this, we are encouraged by management comments on the potential to achieve 4% margins in distribution, whilst we also see opportunities to broaden its brand portfolio and for structural changes in wholesale."
Shore Cap pointed out that Bulmers and Magners owner C&C is valued at just 8x fully recovered EBITDA, which is a sharp discount to its historic metrics.
At 1055 GMT, the shares were up 1.2% at 215.80p.
