RBC Capital has cut its rating for Associated British Foods PLC (LON:ABF) to ‘sector perform’ from ‘outperform’ as it feels valuation of the Primark clothing stores to food and sugar producing conglomerate is “up with events.”

In a note to clients, the Canadian bank’s analysts said: “ABF should offer a steady Primark space expansion story, with leverage to the sugar price and improving Grocery margins.”

READ: Primark’s Xmas sales dip but AB Foods enjoys sugar rush

“However, we think Primark UK is showing signs of maturity, with tougher comps near term, and Primark’s lack of a transactional e-com offer is likely to constrain its long-term profit pool and implied multiple,” they added.

The analysts maintained their price target for AB Foods at 2,850p based on the average of a DCF (discounted cashflow) and sum-of-the-parts analysis.

They concluded: “Primark’s implied P/E is c.17x, still towards the lower end of its range but not unreasonable in our view given still moderate overall LFL sales growth.”

In lunchtime trading, shares in AB Foods were trading at 2,631p, up 0.2% on Monday’s close.