Guzman y Gomez shares climb as UBS upgrades food chain
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More news: Guzman y Gomez shares gained in early trading after UBS upgraded its rating on the Mexican food chain to 'neutral' from 'sell'.
GYG shares rose 4.5% to $40.05 by 10:35am AEDT, extending gains of more than 80% since listing on the ASX last year.
UBS upgrades Guzman y Gomez on higher earnings estimates
The news: UBS has upgraded its rating on Guzman y Gomez, spurred by increased confidence in the Mexican food chain's same-store sales growth and earnings margins.
The numbers: UBS upgraded GYG from 'sell' to 'neutral' and lifted its price target from $37 to $40.
GYG shares have climbed nearly 75% to $38.33 since floating on the ASX in June at $22 per share.
UBS also increased its EBITDA estimates by 2.2% for FY25, 5% for FY26 and 6.2% for FY27.
The context: The upgrade was driven by higher Australian same-store sales growth, boosted by menu innovation, with GYG now including breakfast and coffee and value offers.
UBS analysts said they remain confident in the long-term potential for net new store growth with 15 opened in the first half of FY25 and 31 guided for the full year.
They also noted that EBITDA margins can "positively surprise" compared to the market due to operating leverage, with GYG's same-store sales growth currently outstripping rental, labour and other costs.
The source: UBS research
