Investing.com - UBS initiated coverage on Tate & Lyle Plc (LON: TATE ) (OTC: TATYY ) with a neutral rating and a price target of GBP5.90 on Tuesday.

The food ingredients company has transformed itself into a specialty ingredients business in recent years through the disposal of commoditized operations and the acquisition of CP Kelco in 2024, which provided necessary scale in a consolidating industry.

Despite these strategic moves, Tate & Lyle’s valuation multiples do not reflect the improved portfolio quality, with the stock trading at a forward 12-month EV/EBITDA multiple of 7.1x, representing a 20% discount to its 10-year average and a 45% discount to industry peers.

UBS cited several factors preventing a potential stock rerating over the next 12 months, including subdued near-term organic sales growth expected to lag behind peer group performance and significant exposure to the U.S. market, which accounts for 39% of sales amid fragile consumer confidence.

The investment bank also highlighted potential execution risks associated with the CP Kelco integration and the delivery of targeted synergies as additional concerns limiting upside potential for the stock.

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