DAIRY CREST (DCG) 467P BUY
Shares in food producer Dairy Crest currently languish at 467p as poor sentiment reflects concerns over profit-impinging input costs and limited pricing power. We see merit in buying the shares at the current price for several reasons. The firm behind the Cathedral City, Clover and
Country Life grocery brands, as well as rapidly growing non-dairy spread offering Vitalite, generates a high return on capital.
It leverages high quality assets, a strong supply chain and leading industry positions to generate industry-leading margins, while a commitment to new product innovation augurs well for the future of the business.
Despite cut-throat levels of competition, in the first half of the financial year, Dairy Crest saw strong performances from its two biggest brands,
Cathedral City and Clover.
Besides the core branded groceries business, Dairy Crest offers upside through a fast-developing functional ingredients business with tasty global growth potential.
For the year to March 2019, Shore Capital forecasts pre-tax profit improvement to £66.7m (2018: £62.3m) and a dividend hike from 22.6p to 22.8p, meaning there’s a portfolio-nourishing 4.9% prospective yield on offer. (JC)