DAVY VIEW

Greggs shares have re-rated meaningfully since its interim statement, supported by stronger near-term margin delivery. We continue to recognise the quality of the store rollout model, improving free cashflow (FCF) conversion and modest leverage; however, we believe these strengths are more than fully captured in the current valuation. The central questions around medium-term organic growth and the impact of sustained cost pressure remain unresolved. Given the model’s sensitivity to both factors, clearer evidence of consistent execution is required to underpin the current valuation and support any further re-rating. We raise our price target to 1800p but downgrade our rating to ‘Neutral’.