In control of its destiny. Tesco remains our most preferred It says a lot about Tesco (and Sainsbury''s yesterday) that despite billions of cost pressure - more than they could ever hope to even touch with cost saving, let alone offset - they will finish 2022/23 with the EBIT they targeted at the start. Indeed, except for Colruyt, this is a theme across food retail. Investor anxiety is high given ongoing cost pressure for consumer and company. But if markets were rational in 2022 and cost pressure is likely to ease in 2023, at what point do you become more constructive? With a 9% free cash flow yield, Tesco remains our most preferred. Consensus seems to have been de-risked for 2023/24 asking for only flat EBIT We''ll have to wait until FY results (13 April) for more precise guidance from Tesco on 2023/24 but it seems to us that consensus has been de-risked asking for only flat retail EBIT. Though we''ve no doubt you can find better profit growth elsewhere, a much sharper focus on capital allocation means cash conversion has improved sharply and even with our more cautious definition, we think Tesco can comfortably deliver GBP1.5-1.6bn of free cash flow next year after GBP1.8bn this. With a buyback (we pencil in GBP750m in 2023/24), there is tangible payback from a lot of heavy lifting. A very rational market where it is easy to identify losers The market of course fears consumer spending. With 7% LFL growth in the UK, Christmas seems to have again been an island with the consumer now retrenching. But it is a familiar message and with trading down from dining out and so higher margin premium ranges, there are opportunities too. But it''s also a market where it is easy to identify losers (Morrisons of late, we think a poorly differentiated ASDA will lose its recent momentum) and crucially, rational behaviour. Nudging up TP on better cash flow and unwind of discount Market structure remains the most important question to answer in food retail and in...