Tesco more than delivered for us; where should we rerate it to? Our cautious stance heading into Tesco''s H1 results was misplaced. Though the group issued subdued H2 guidance (fairly flat versus H2 2019/20) after a strong H1 (21% ahead of H1 2019/20) as we expected the broader messaging more than compensated. A new GBP1.4-1.8bn free cash flow ambition was the highlight; at the middle of the range, the yield is c8%. Having had a frustrating wait, it seems a rerating is under way. The question then is, what is the right multiple? Our new 345p TP still isn''t shooting for the stars Given the willingness to issue free cash flow guidance, we now think Tesco''s rerating can be bigger. Our preferred valuation approach is EV/EBIT and if you put Tesco UK on the same multiple as Ahold Delhaize (15.3x 2022E), you''d derive 355p. If you wanted to aim higher, Unilever (390p) or Walmart (450p) would be living the dream. There is of course the obvious point that Tesco still needs to execute against the plan but if we aim for a notch below Ahold Delhaize (15x), we hit our new 345p TP (from 310p) which would equate to a c6% FCF yield at the mid-point of guidance. Cheap and cheerful - an attractive combination in food retail The track record for making money buying cheap food retailers is mixed; its often earnings that are wrong, typically because of price competition. There''s no doubt there''s plenty of inflation and disruption around which poses a risk. However, we remain of the view the UK market is rational with private equity ownership likely to make it more so. Tesco is also outperforming, and sales momentum tends to stick in food retail. Tesco is cheap, cheerful with best in class ESG credentials. Growth comes with a small g but that''s not the call; it is capital into cash flow Though Tesco took the time to talk up its earnings opportunities during the presentation, notably supplier income, big margin moves are not an aspiration. Earnings growth is...