The shares of the Hilton Food Group, now 878p, are being overlooked, broker says that the market is missing a big opportunity, TP 1140p

17.04.2025

This £798m-capitalised group is a leading international food manufacturer, supplying high-quality meat, seafood, plant-based foods, and pre-prepared meals, alongside supply chain solutions.

The Huntingdon-based group works with leading international retailers and food service brands, creating and producing at scale high-quality packaged meat, seafood, meat alternatives and prepared food products.

Hilton Food Group (LON:HFG) has over 8,000 employees and 24 state-of-the-art facilities serving customers in 19 markets across Europe, Asia Pacific, and North America.

The group’s business is built on long-term partnerships with retailers and suppliers, driving international growth and shared value.

It has a focus on delivering high quality, affordable, traceable, and sustainable food products while investing in innovation and automation to meet evolving consumer needs.

Management Comment

After announcing his group’s 2024 results CEO Steve Murrells stated that:

"I'm incredibly proud of our strong performance in 2024, with core retail meat volumes outpacing the market.

Our teams have gone above and beyond to deliver high-quality products, exceptional service, and the innovation consumers desire, all while maintaining great value.

This unwavering commitment reflects our focus on excellence, compliance, and meeting the highest industry standards to better serve our customers.

Through innovation, automation, and strategic partnerships, we continue to unlock new growth opportunities, including our expansion into Saudi Arabia and progress with Walmart in Canada.

Our team's commitment ensures we stay ahead of evolving consumer preferences, enabling us to drive category growth and anticipate future demand.

With advanced automation, a strong sustainability focus, and a proven track record of successful product launches.

Hilton Foods is expert in providing the highest levels of customer service and operating the most efficient sites around the world.

These attributes underpin our existing relationships and leave us strongly positioned to enter new markets and attract new customers. I am excited for the opportunities ahead."

Broker’s Views

Analyst Matthew Abraham, at Berenberg, considers that the trend of this group, in outpacing its peers, is going to continue this year.

In stressing his Buy rating on the group’s shares, he lifted his Target Price to 1120p against 1090p previously, and that is despite lower trading.

But the group had navigated tricky market conditions last year.

However, he has stated that:

“We estimate Hilton is materially outperforming its end markets and taking share from its peers.

This appears to be overlooked by the group’s current valuation given Hilton trades on 13 times 12-month forward earnings – being more than one standard deviation below its trailing 10-year historical average.

Positive momentum in the latter part of last year has ‘continued into 2025 seeing full-year expectations reaffirmed.”

Over at Shore Capital Markets, its analysts Darren Shirley and Clive Black, have current year estimates for £4,032m (£3,988m) sales, with adjusted pre-tax profits of £80.1m (£76.1m) and earnings of 62.0p (60.0p) per share, easily covering an unchanged dividend of 34.5p.

For next year the analysts look for £4,147m sales £86.5m profits, 67.2p earnings and an increased dividend of 36.3p per share.

The analysts stated that:

“Hilton Foods is a high-quality business with excellent management that has leading capability in the packing and distribution of proteins across red meats, white meats, vegetarian and increasingly seafood.

The group has now expanded into one with considerable scale, with long-standing and increasingly well-embedded customer relationships.

We particularly call out the excellent RoCE and foresee many years of growth ahead, underpinned by such long-standing partnerships and still-embryonic relationships as well.”

Analyst Sean Kelly, at Panmure Liberum, recently noted that the group has expanded into the Middle East, proving it has a longer growth runway than the market is pricing in, and reiterated his Buy rating, putting out a Target Price of 1140p on the food supplier’s shares.

Early last month the group signed a joint venture with NADEC in Saudi Arabia, with production due to start in 2026, to supply the joint venture and integrate its red meat products into their well-established distribution network. 

In the country red meat is typically sold through in-store butchers rather than the centralised packaging offered by Hilton.

Kelly stated that:

“We expect this contract to demonstrate significant growth over time, similar to its initial UK and Australian operations.

Nevertheless, this contract is yet further proof that Hilton is both a higher quality operator with a longer growth runway than the low valuation currently appreciates.”

My View

The group’s shares, along with the market generally, have endured a bit of yo-yo price action since the results at the start of last week, ranging from 812p to 902p – they are now around 878p.

In my view these shares make an attractive and good-yielding investment.

(Profile 23.12.24 @ 916p set a Target Price of 1100p)