Cranswick PLC (LON:CWK) is likely to be benefitting from the surge in demand for food through UK retailers amid the coronavirus lockdown, as well as from higher prices and demand for pork in China, analysts reckon.
Predicting these benefits will last a while, broker Peel Hunt said that even though the shares are highly rates and there is some forecast risk, it was upgrading its rating to buy from hold and upping its share price target to 4,000p from 3,200p.
“Schools are unlikely to return until autumn and summer holidays are likely to be spent at home, which means demand through retailers will remain high,” the Peel Hunt analysts said in a note to clients.
Over at Liberum, analysts also seemed to have picked up that Cranswick “continues to trade well” in its core UK market amidst high consumer demand for staple protein sources of sausages, bacon, ham and chicken.
”With food and farming deemed essential by the government during the coronavirus crisis, all of Cranswick's facilities are running at high operating rates, the Liberum analysts said in a separate note on Monday.
The FTSE 250 company is ramping up its new poultry facility as planned and “should be at full capacity soon” and supply chains for imported goods are “holding up well”, the Liberum analysts said.
Liberum kept its buy recommendation and its target price at 3,800p.
Porky prices as China demand remains high[hhmc]
The demand increase has not just been in the UK but worldwide, the Peel Hunt analysts noted, observing that Brazilian protein colossus JBS has stated it is doing all it can to keep production levels high.
“The worldwide demand for protein will mean China remains short of pork for a longer period than envisaged originally,” the Peel Hunt analysts said.
Analysts said that while the sow herd in China is rebuilding rapidly after the outbreak of African Swine Fever last year, “this has a long way to go before returning to previous supply levels” as the gestation and growing period lasts at least 12 months and so the slaughter capacity will only come through next year.