Reckitt Benckiser Group PLC (LON:RB.) has been listed as a ‘top pick’ among firms in the food and household & personal care products sector by analysts at Citi, who said the coronavirus (COVID-19) pandemic has “accelerated the return of size as a key advantage”.
In a note on Tuesday, the bank cut its price target for the Dettol and Durex maker to 8,200p from 8,700p but retained their ‘buy’ rating, saying that the cycle towards larger firms in the space and away from the “small is beautiful” ethos is “here to stay”.
The bank also said this divide between the small and large firms explained “new operational and stock market polarisation between mega caps and medium sized names in 2020” which in turn implied that 2021 “will be a transition year and that the true shape of most companies will be revealed in 2022”.
“We expect cautious outlooks marked by either little visibility around share gains durability (for the relative winners) or the need for painful capital reallocation (investment program, dilutive portfolio reshaping) for the more challenged models”, Citi said, adding that the schism in the sector will have “durable consequence”.
Shares in Reckitt were up 0.2% at 6,224p in late-morning trading.