Magnum Ice Cream Shares: Deutsche Bank Cautious as Sector Growth to Be Volatile

Shares in Magnum Ice Cream closed around 1,203p on Tuesday, down just over 3%, as Deutsche Bank initiated coverage of the company with a cautious stance, citing volatility and seasonality across the ice cream sector.

The stock is up around 1.3% so far on Wednesday.

In a research note, Deutsche Bank began coverage with a Hold rating and set a price target of EUR 14.50. 

While acknowledging Magnum Ice Cream’s position as a global market leader in the category, the analyst said growth prospects are likely to be less predictable than those seen across the wider consumer staples sector.

“We expect category growth to be more volatile than the Staples average and it remains highly seasonal,” the bank stated.

However, the analysts flagged specific risks, including Magnum’s exposure to Turkey, which accounts for around 8% of sales. 

With inflation remaining elevated, the analysts said there is still a risk of a further foreign exchange reset that could weigh on reported performance.

The note also raised questions around longer-term growth initiatives. Deutsche Bank believes it is not yet clear whether cabinet expansion in other markets would generate the same revenue per square metre as in existing markets.

While Magnum has scope to gain market share, the analysts suggested that increased digital commerce could intensify competition, particularly as smaller players improve their distribution capabilities.

On the positive side, Deutsche Bank highlighted easing raw material costs over the next two years as a supportive factor. The decline is expected to benefit gross margins and provide greater flexibility for investment across the business.

Overall, the broker feels Magnum Ice Cream combines category leadership with structural growth opportunities, but these are balanced by macroeconomic, competitive and execution risks that justify a more cautious outlook.