Canaccord Genuity lowers target price on Michelmersh Brick Holdings
Analysts at Canaccord Genuity lowered their target price on building products manufacturer from 180.0p to 170.0p on Tuesday following the group's interim trading results.
Canaccord Genuity said Michelmersh's interims confirmed "a resilient outcome" for the six months ended 30 June, with delivering revenues of £35.4m and adjusted underlying earnings of £7.2m, down 15.7% and 17.2%, respectively, amid "persistent headwinds" from "a challenging macro backdrop" and a strong comparative.
The Canadian bank stated that "pleasingly", Michelmersh has also taken share in "a highly competitive market", allowing it to outperform a 9% decline in UK brick dispatch volumes through H124. Strategic actions to target a diverse range of end markets with a wide product set, and to work with customers on appropriate pricing, have been key to securing order intake at Michelmersh, noted Canaccord.
"Encouragingly, we are told that order intake continues to trend positively and is once again running ahead of capacity at levels not seen for 24 months," said Canaccord. "This is providing the group with revenue visibility through H2 to maintain full production volumes and commit to planned capex initiatives that target growth, efficiencies and sustainability."
Looking ahead, Canaccord noted that while market fundamentals have been strengthened by the new Labour Government's pledge to build 1.5m homes and sector PMIs have begun to improve, the timing of an anticipated market recovery "remains uncertain" and was highly correlated to interest rate policy.
"As a result, Michelmersh is now guiding that H2 2024 performance is likely to provide a similar outcome to that of H1. We adjust our FY24E estimates accordingly (EBITDA -20%) and anticipate a recovery which builds through FY25E," concluded Canaccord, which also maintained its 'buy' rating on the stock.
Reporting by Iain Gilbert at Sharecast.com
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