Equities firm Nomura has upgraded its rating on dairy products group Danone to buy from neutral.
Nomura said it expected Danone to be “the standout performer” in the food manufacturing sector over the next few years.
The firm has analysed the company across its 24 operating units on a geographical and category basis.
It forecasts the company will deliver around 8% sales growth per annum over three to four years.
Danone’s strategy of focusing on MICRUB (Mexico, Indonesia, China, Russia, the US and Brazil) and brand development should support this view, it said.
Sales growth will be combined with an increased focus on cost efficiency, which will improve the group’s margin levels way above its competitors, Nomura said.
According to Nomura, Danone has enjoyed a period of relative complacency over the last decade, due to the success of its Activa and Actimel brands, which have driven volumes. However, there are still opportunities, it said.
“The market should reward Danone through the next phase for the business with a more significant premium to peers, who should report lower growth and incremental returns,” said David Hayes, Nomura’s equity analyst.
Nomura has raised its target price to €64 from €46.