RBC Capital Markets has initiated coverage of C&C Group (LON:GCC) with a “sector perform” rating and a price target of £1.60, citing the drinks company’s stabilisation strategy, strong regional brand positions, and significant shareholder returns, in a note dated Wednesday.
The brokerage said C&C’s valuation now trades below larger peers, reflecting competitive pressures and limited growth potential.
“While it’s early days for CEO Roger White, we see a clear strategy to stabilise and simplify operations,” the brokerage said.
White, who joined in January 2025, has focused on cost efficiencies and integration, while Andrew Andrea, the chief financial and transformation officer, is set to depart by March 2026.
C&C, the owner of Tennent’s lager and Bulmers cider, generates around 82% of its sales through its U.K. distribution network.
The integration of distribution has diluted brand margins by about 11% but delivered permanent savings equivalent to 1% of revenue annually.
The Brand division, which represents 18% of group revenue, had a 15.4% margin in fiscal 2025, compared with just 2.3% for Distribution, which accounts for 82% of revenue.
RBC forecast C&C’s operating margins to improve by 15 to 20 basis points annually, reaching about 5.2% by fiscal 2028.
It projects adjusted operating profit rising from €77.1 million in fiscal 2025 to €101 million by fiscal 2030.
The brokerage said the company’s goal of generating more than €75 million in free cash flow by fiscal 2027 is achievable, supported by its simplification program and tighter cost controls.
Revenue is expected to grow modestly, with forecasts of €1.67 billion in fiscal 2026 and €1.71 billion in fiscal 2027, compared with €1.67 billion in fiscal 2025.
Adjusted diluted earnings per share are projected to rise from 11.6 cents in fiscal 2025 to 13.9 cents by fiscal 2027.
Dividend per share is forecast at 6.2 cents in fiscal 2026 and 6.7 cents in fiscal 2027, implying a yield of about 4%.
Maciver noted that while flagship brands hold leading positions in Scotland and Ireland, “markets remain challenging.”
Tennent’s has more than 30% of Scotland’s on-trade beer market, and Bulmers controls over 60% of Ireland’s on-trade cider market, but both categories face volume pressure.
RBC expects brand revenues to rise by around 2% per year, with price and mix improvements offsetting weaker volumes.
C&C’s net free cash flow yield of 8% underpins its €150 million shareholder return target by fiscal 2027, equal to about 24% of its market capitalization.
RBC said that while this is compelling for income-focused investors, it is already factored into the share price.
“Shareholder returns are already priced in,” the brokerage said, noting that the stock’s rally of nearly 48% earlier this year has since retraced, leaving shares up about 20% since the fiscal year began.
At 11.9x 2026 estimated EV/NOPAT, C&C trades below the 14.1x average of larger peers such as Heineken, Carlsberg and Royal Unibrew. RBC’s £1.60 price target, equivalent to 14x 2026 estimated EV/NOPAT, reflects about 9.6% upside.
Source :
https://www.investing.com/news/stock-market-news/rbc-starts-cc-group-at-sector-perform-sets-160-price-target-on-limited-growt-4252413
