HSBC on Tuesday upgraded its recommendation on Sodexo from 'hold' to 'buy', with a price target raised from 100 to 120 euros, citing mainly valuation issues.

In a sector note, the financial intermediary says it is 'impressed' by the steady progress made by the foodservices group in its operating performance following its restructuring.

HSBC particularly praises the improvement in customer retention, which is now at its highest level since 2018, with a further rise to be expected.

In these conditions, the analyst says he expects the stock to close the valuation gap that separates it from Compass, with the French group's stock currently trading on an Enterprise Value/Ebit ratio of 11.8x, compared with 12.5x on average before the pandemic and 17x for the British company.

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