Treatt PLC (LON:TET) has yet again beaten expectations by delivering an exceptionally strong start to FY17 despite Q1 typically being a seasonally weak quarter. The success is across the board and has led to a surprise trading statement (23 February). We upgrade our forecasts to reflect the strong sales growth and also the margin improvement as Treatt moves further up the value chain. Our fair value increases to 350p (from 293p) as a result.
Strategy continues to deliver
Treatt’s long-term strategy is to deliver consistent, sustainable growth in profit through developing value-added ingredient solutions, coupled with effective cost control. Key to this strategy is improved customer focus and closer relationships, 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. 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 10%, while PBT and EPS increase by c 20-30%, as Treatt’s move up the value chain should deliver a strong improvement in margins.
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