Deutsche Bank raised its recommendation on Nichols PLC (NICL.L) to Buy from Hold on Thursday, while leaving its price objective unchanged at 1,150 pence. The upgrade followed a company analyst presentation that the bank said showed revenue growth across Nichols’ four principal product categories.
At the centre of the update is Vimto, the group’s flagship brand. Vimto retains the number two position in the UK squash market with roughly a 13% value share and delivered growth of 4.6%, gaining share from the category leader, Robinsons, which holds about 30%.
Category-level performance at Vimto was mixed but skewed toward higher-value growth. In ready-to-drink stills, the brand achieved revenue growth of 11.5% - nearly double the pace of the wider category, according to the analyst presentation. Flavoured carbonates saw Vimto revenue rise 2.5% while the category grew 6.9%; volumes in that subcategory declined by 4.6%, a pattern the company attributes to a deliberate focus on value rather than volume. In energy drinks, Vimto reported 41% revenue growth, albeit from a small base.
Deutsche Bank noted operational and geographic initiatives that it expects will support further gains. The bank said Nichols’ move to in-market bottling in Africa should underpin incremental growth in that region. It also expects the business to expand innovation and extend distribution in major grocery retailers, which the bank views as positioning the Vimto brand for medium-term growth.
On margins, Deutsche Bank anticipates improvements in gross profit following implementation of a new enterprise resource planning system emphasising procurement and inventory management. The bank said any expected margin expansion is likely to be reinvested into brand growth initiatives.
The combination of the product-level growth shown at the presentation, the strategic shift to local bottling in Africa, distribution gains in grocery retailers and an ERP-driven focus on procurement and inventory underpinned Deutsche Bank’s move to upgrade the stock.
Note: The article reports the bank’s stated expectations and the company’s reported performance; outcomes remain subject to execution and market conditions.