THG’s share price jumped 5 per cent on Monday after an analysts’ report concluded: “The attractions of the THG equity story should become increasingly apparent.”
The 33-page report, by the hugely respected Jefferies, is the first following THG Ingenuity’s demerger and comes ahead of the company’s expected inclusion in the FTSE 250 Index in March.
Jefferies is one of the world’s leading full-service investment banking and capital markets firms.
The analysts have set a price target of 75p per share, compared to its current share price of 40.68p.
On the upside, Jefferies predict THG’s share price could rise to 135p – more than three times its current value.
The projections are still well down on the 500p IPO share in 2020 but have been well received by the markets.
The sentiment has been largely driven by the demerger of THG Ingenuity from the profitable THG Beauty and THG Nutrition.
Last month CEO Matt Moulding predicted the company to have a ‘remarkable 2025’ despite a slight fall in sales for the fourth quarter of 2024.
The report by Jefferies stated: “With the Ingenuity demerger completed and external headwinds having largely passed, the attractions of the THG equity story should become increasingly apparent – leading digital-first global brands in the growing Beauty and Nutrition markets, margin upside, and robust cash generation.
“Having been ‘Restricted’ since the demerger announcement, we resume coverage at Buy. The post-demerger THG is a leading global consumer brands group.
“2024 was a busy year for THG, culminating in the October announcement that it would undertake the demerger of its eCommerce services platform, Ingenuity, supported by a £95m fundraise.
“Now completed, the investment case has been materially simplified – the remaining THG group is a collection of global consumer brands in the Beauty and Nutrition segments, led by market-leading eCommerce operators Lookfantastic and Myprotein.
“The group is firmly cash generative and has been guided to deliver MSD to HSD revenue growth in the medium term. Beauty: Margin has recovered and growth has returned.
“THG Beauty spans the beauty space, operating as a digital-first retailer (c.80 per cent of segment revenue), a prestige brand owner (c.10 per cent), and a manufacturer (c.10 per cent) – the main contributor is Lookfantastic, the number one global online prestige Beauty retailer.
“Although the post-pandemic eCommerce reversal resulted in a challenging FY22, THG Beauty has benefited from an impressive pivot away from unprofitable territories that has seen EBITDA margin rebuild rapidly and revenue return to growth in FY24.
“Supported by a growing global Beauty market, and leveraging its longstanding brand relationships, scale advantages, and strong customer-facing proposition, we model growth of +7.5 per cent in FY25e and FY26e.
“Nutrition: Headwinds have masked a highly attractive asset. THG Nutrition, led by the Myprotein brand family, has faced significant challenges in recent years, including FX headwinds, in its second largest territory (Japan), bouts of whey price inflation in 2022 and 2024, and disruption from its rebranding launched in 2023.
“With these headwinds addressed or set to alleviate, we see scope for the fundamental qualities of the business to be appreciated – a vertically-integrated, brand-owning, price and market leader in a structurally growing category, with a double-digit through-the-cycle EBITDA margin.
“Reflecting these qualities, we anticipate top-line growth of +5 per cent in FY25e and a rapid rebuild of EBITDA margin in the coming years, towards the guided MT target of 12 per cent (FY24e 6.5 per cent). We forecast robust growth, and a material margin rebuild.
“Buy. Reflecting the above, we see THG delivering a strong growth trajectory over the coming years, with a top-line CAGR (Compound Annual Growth Rate) of +7 per cent and continuing EBITDA building from £90m in FY24e to £133m in FY26e at a CAGR of +20 per cent.
“We see a strong fundamental proposition, longer term margin upside and, based on a blended average of Beauty and Nutrition comps, set our PT (price target) at 75p. We resume our recommendation at Buy.”
In January THG Ingenuity confirmed it expected to make 90 redundancies as it centralises its team in Manchester.
A spokesman told BusinessCloud: “As a business, we are committed to continuously improving THG Ingenuity’s operational efficiency.”