Purecircle well placed for growth13 Dec 2015 21:49
From http://www.proactiveinvestors.co.uk/companies/news/120180/purecircle-to-be-a-winner-from-sugar-concerns-suggests-macquarie-120180.html
Purecircle to be a winner from sugar concerns, suggests Macquarie
13:25 08 Dec 2015
Sugar’s growing demonisation should drive the market for Purecircle’s (LON:PURE) stevia sweetener alternative, according to Aussie broker Macquarie.
Mexico has been in the vanguard of this health drive with its introduction of sugar taxes in 2013.
Since then, volumes at the leading fizzy drinksupplier are down by 5-7% with prices raised by some 15% to maintain the margin.
Attempts to reduce the tax met with a wave of protest said Macquarie and academics now suggest a sliding scale for the worst offenders on the sugar front is a more elegant solution.
A plant extract, stevia, is already being used as an alternative to sugar by drinks manufacturers and taxes will force food and drinks groups to consider it even more.
The broker believes European governments, and the UK in particular, may follow Mexico and impose a sugar tax or at the very least a labelling system that makes it clear how much sugar a particular drink contains.
Macquarie says that either way, tax or labelling, these efforts can only speed up research into calorific reductions, ultimately increasing stevia adoption and usage.
Purecircle had a tough 2015, acknowledges the broker, due to tight stevia leaf supply which squeezed margins, but with prices now stabilising and the sugar debate underpinning the long term appeal, the shares trade on an unjustified discount to other sugar and sweetener groups.
The broker reckons 30% sales growth annually is possible over the mid-term especially with India’s approval of stevia in November and the new US patent for Reb-M (zero-calorie) use in beverages.
‘Outperform’ with a target price of 580p, it concludes.
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