No-Moat ABF Increases Profit Guidance on Account of Resilient Consumer Discretionary Spending

We are increasing our fair value estimate for no-moat Associated British Foods to GBX 2,250 from GBX 2,200, on account of more-resilient-than-anticipated consumer spending and milder cost inflation during the first half of the fiscal year. We now expect group adjusted operating profit for the full fiscal year of GBP 1,430 million from GBP 1,290 million previously, which is broadly in line with the previous year and the latest management guidance. Our longer-term expectations remain unchanged. Shares have recovered significantly from the lows in early October and now trade in the 3-star territory, although an upside of about 10% still remains in our valuation considering ABF's High Morningstar Uncertainty Rating.