Despite the surprise trading statement of 23 February, which led us to raise our sales forecasts by c 10% and PBT and EPS by c 20-30%, Treatt PLC (LON:TET) has yet again upgraded its outlook for FY17, which leads us to raise our EPS forecasts again by c 6-9%. Our fair value increases to 401p (from 350p) as a result. The constant stream of upgrades demonstrates the strength of momentum in the business as the company moves further up the value chain.
Strategy delivering excellent results
Treatt’s long-term strategy is to deliver consistent, sustainable growth in profit through developing value-added ingredient solutions, coupled with effective cost control. Improved customer focus and closer relationships are a key part of this strategy, with the ultimate goal of delivering greater profitability by concentrating on the more value-added segments. This goal has been delivered consistently over the past few years, with results often beating expectations, and momentum is now accelerating, with more frequent and more significant upgrades coming through. As a result of the trading update, we yet again upgrade our full-year forecasts for 2017-19 to reflect the improved outlook. Our sales forecasts move up c 0-3%, while PBT and EPS increase by c 6-9%, as Treatt’s move up the value chain should deliver a strong improvement in margins.
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