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Broker views: Soft drinks and packaging

02 March 2017 14:19

Societe Generale has upgraded its recommendation on AG Barr (LON:BAG) to hold (from sell) on the back of the company's planned reformulation of its soft drinks portfolio ahead of the proposed UK sugar tax from April 2018.

It said: "As a result, AG Barr should largely avoid the tax, and we raise our forecasts as a result".

Analysts upped their target to 538p (from 425p).

Meanwhile, HSBC stuck with its hold call and 535p target, commenting the "announcement helps to reassure us that the company should be able to successfully navigate the introduction of a sugar [tax]".

The bank added: "But it does not reduce its exposure completely and there remains the issue of substantial gross margin pressure in FY 2018e."

In the paper and packaging sector, Jefferies International has increased its rating on Smurfit Kappa (LON:SKG) to buy (from hold), which it says is due to the company's valuation discount to sector peers.

It said: "Europe's largest box maker Smurfit Kappa was impacted by 2016 FX headwinds & capacity concerns. However Feb 8 SKG 4Q17 results saw return to positive 2017 pricing momentum. Smurfit Kappa is balanced in containerboard, hence well placed to benefit from 2017 H2 box price hikes."

Story provided by StockMarketWire.com

Related Company: BAG

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