ABF: Primark Separation And Buybacks Will Shape Future Share Performance

Analysts have modestly raised their price targets for Associated British Foods, reflecting expectations that operational improvements, a potential separation of the Primark business, and higher profit margins will support upside for the shares, even though the fundamental fair value estimate has been reduced slightly to about £22.39 from roughly £22.76 per share.

Analyst Commentary

Recent Street research reveals a divided but constructive stance on Associated British Foods, with some bullish analysts lifting ratings and price targets while more cautious voices retain negative recommendations despite modest target increases.

Bullish Takeaways

• Bullish analysts see the potential separation of the Primark business as a major catalyst, arguing that a breakup could unlock a higher sum of the parts valuation than the current consolidated structure implies.
• The uplift in price targets suggests confidence that operational improvements and stronger margins can sustain mid single digit to high single digit earnings growth, supporting upside from current trading levels.
• Higher target prices also reflect increased conviction that capital allocation, including any restructuring or portfolio simplification, will be executed effectively and rewarded by the market.
• The move to more positive recommendations indicates growing belief that previous execution risks around Primark expansion and cost control are becoming more manageable, which in turn is seen as warranting a rerating of the shares.

Bearish Takeaways

• Bearish analysts continue to see the shares as overvalued relative to their fundamental assessment, maintaining negative recommendations even as they raise price targets slightly.
• Concerns persist that the market is already pricing in much of the anticipated margin improvement and Primark optionality, which limits further rerating potential from here.
• More cautious views highlight execution risk around any Primark separation, warning that operational disruption, regulatory complexity, or a suboptimal deal structure could erode the value creation case.
• There is ongoing skepticism about the durability of recent profit gains in a softer consumer environment, with worries that cost pressures and slower like for like growth could cap medium term earnings momentum.

What's in the News

• Citi raised its price target for Associated British Foods to 1,830 GBp from 1,770 GBp while reiterating a Sell rating on the shares (Citi research).
• Management is reviewing the group structure and considering a demerger that would separate Primark from the food operations. This could potentially result in Primark being listed as a standalone company on the London Stock Exchange, while Wittington Investments remains the majority shareholder of both entities (company and media reports).
• The board has authorized a new share buyback plan, with approval granted on November 4, 2025 (company announcement).
• Associated British Foods has launched a share repurchase program of up to £250 million, expected to be completed before the end of financial year 2026 (company announcement).

Valuation Changes

• Fair Value Estimate has edged down slightly, from about £22.76 to approximately £22.39 per share.
• Discount Rate remains unchanged at 7.07%, indicating no shift in the assumed cost of capital.
• Revenue Growth has been trimmed marginally, from around 2.89% to roughly 2.86% per year.
• Net Profit Margin is expected to improve modestly, rising from about 7.00% to approximately 7.15%.
• Future P/E multiple has been reduced slightly, from roughly 12.32x to about 11.87x, which implies a more conservative valuation of future earnings.