(News Bulletin 247) – The financial intermediary raised its advice and its price target on Elior this Friday. JP Morgan welcomes the group’s recovery efforts, favored by price increases, efficiency gains and a successful exit from unprofitable contracts.

Elior goes public on Friday after an increase in recommendation by JP Morgan, with analysts judging that the French collective catering group is well positioned to succeed in its restructuring, after several difficult years.

On the Paris Stock Exchange, the share gained 7.20% to 2.68 euros, signing the best performance of the SBF 120 index which increased by 0.3% around 2:10 p.m.

In a more general note on the European hotel and catering sector, JP Morgan raises its recommendation on Elior shares from “neutral” to “overweight” and its price target from 3.5 to 4.5 euros.

Analysts say Chairman and CEO Daniel Derichebourg is taking the right steps to turn around the company, focusing on improving the contract mix and recovering margins.

Clear signals of improvement

The note welcomes clear signals of Elior’s operational improvement, notably through price increases, efficiency gains and the successful exit of unprofitable contracts.

“While in the short term, Elior remains selective and plans to prioritize new contracts with above-average profitability, the next step will be to improve overall contract dynamics, which are lagging behind by relative to its peers for some time,” analysts predict.

JP Morgan also anticipates that Elior’s profitability should return to its level before the COVID-19 crisis by 2027, with the group aiming for a target Ebita margin (operating profit restated for certain items) of 3.8 %.

The note, however, mentions the risks weighing on the stock, including the pressure of inflation and possible delays in the recovery of the group’s underlying margin.

(With Reuters)