Investing.com -- UBS has initiated coverage on Tate & Lyle Plc (LON: TATE ) at “neutral” with a price target of 590p, citing muted volume growth prospects and limited near-term catalysts.
Despite recent portfolio transformation efforts, including the 2024 acquisition of CP Kelco, UBS analysts do not expect a meaningful share price re-rating within the next 12 months.
Tate & Lyle has repositioned itself as a specialty ingredients company by exiting commoditized segments and pursuing scale in a consolidating industry.
However, UBS highlights subdued organic sales growth (OSG) and ongoing integration risk as key factors weighing on the outlook.
For FY26, UBS projects OSG of 2.9%, slightly above the consensus estimate of 2.6%, and adjusted EBITDA of £458m, broadly in line with the £460m consensus.
The brokerage points to the company’s 39% sales exposure to the U.S., the highest in UBS’s Ingredients coverage, as a drag, amid signs of fragile consumer confidence.
Additionally, execution risk tied to the CP Kelco integration may limit near-term investor confidence, despite the deal’s long-term strategic benefits.
Valuation does not yet reflect the improved business profile. Tate & Lyle trades on a forward 12-month EV/EBITDA multiple of 7.1x, representing a 20% discount to its 10-year average and a 45% discount to peers.
While this implies some downside support, UBS notes that the stock’s relative discount is in line with its historical range, the 10-year average discount to peers is 40%.
UBS analysts do not expect the upcoming Capital Markets Event on July 1 to serve as a catalyst for re-rating.
They see the event as largely educational, with management likely to elaborate on the CP Kelco acquisition and the medium-term growth potential of the combined business.
However, UBS believes investors will require tangible delivery on the company’s 4–6% revenue growth guidance, which will only be demonstrable in FY26 results.
The report also includes a comparative analysis of historic growth trends, peer benchmarking, and industry transactions.
UBS’s collaboration with HOLT shows that while current valuation offers limited downside risk, upside remains capped without clear signs of volume acceleration and operational execution.
UBS continues to favor DSM-Firmenich and Novonesis, both rated “buy,” as its top picks in the Ingredients sector.