RBC Capital Markets has raised its target price for Greencore Group Plc from 300p to 330p and reiterated an 'outperform' rating on the stock, highlighting the upside potential from the convenience food group's acquisition of Bakkavor.
The deal, which was first announced in May 2025 but only completed this month, sees Greencore take over the smaller peer for £1.2bn, creating a UK convenience food business with over 30,000 employees and combined revenues of £4bn.
According to RBC, the acquisition offers "compelling value creation potential" for Greencore. "We see upside potential from cross-selling, new product development, procurement scale, and expanded customer access," the broker said.
RBC also said that the flagged cost synergy target of £80m within three years - 50% of which is expected within the first year - is "achievable and reflects disciplined integration planning".
Meanwhile, with leverage expecting to fall from 2.4x at the end of September to 1.6x by September 2027, there is potential for additional acquisitions in the future, the broker said.
"Our updated DCF-based price target of 330p implies 10.9x C2027E EV/adjusted EBITA, just below peers at 11.1x. The combination of scale benefits, strong synergy potential, and deleveraging creates a compelling risk-reward for investors in our view," RBC said.
The stock was more or less flat at 273.6p by 0933 GMT.