Deutsche Bank's Upgrade#
Deutsche Bank has raised its rating for Nichols PLC (NICL.L) from Hold to Buy, while keeping its price target at 1,150 pence. This decision comes after a recent analyst presentation highlighted the company's revenue growth across its four main product categories.
Strong Performance of Vimto#
Nichols' flagship brand, Vimto, is the second-largest player in the UK squash market, holding about 13% of the market share. The brand experienced a revenue growth of 4.6%, successfully gaining ground from the market leader, Robinsons, which commands roughly 30% of the category.
Growth Across Categories#
In the ready-to-drink stills segment, Vimto's revenue surged by 11.5%, nearly doubling the growth rate of the broader market. Meanwhile, in the flavored carbonates category, Vimto's revenue increased by 2.5%, despite a decline in volumes by 4.6%. This indicates a strategic shift towards prioritizing value over volume. Notably, Vimto's energy drinks saw a remarkable growth of 41%, although this is from a relatively small starting point.
Future Growth Prospects#
Deutsche Bank believes that Nichols' transition to in-market bottling in Africa will contribute to additional growth in that region. The bank also expects that increased innovation and wider distribution in major grocery retailers will enhance Vimto's market position in the medium term. Furthermore, the implementation of a new enterprise resource planning system is anticipated to improve gross profit margins by optimizing procurement and inventory management. This margin expansion is expected to be reinvested to further support brand growth.