Broker tips: M&G, Travis Perkins, Cranswick

Deutsche Bank downgraded its stance on shares of asset manager M&G to ‘hold’ from ‘buy’ on Thursday, cutting the price target to 195p from 210p as it argued that while first-half results were a positive surprise, underlying trends appear weak.

"Recent results were marked by better-than-expected costs and exceptionals, with management also reiterating the group's 2020-2022 capital generation target,” DB said. "As we dig deeper, however, the picture looks less engaging. Costs were lower than expected in the 1H, but ultimately we think revenue pressures will prove the stronger force.

"Likewise, we now believe that the capital generation target can only be achieved through another reinsurance deal, which may merely accelerate value rather than adding to it, and could at that stage prompt a re-basing of the dividend."

DB said that while it recognises the attractive dividend yield, with no catalysts to justify a re-rating, it decided to downgrade.

Analysts at Berenberg raised their target price on builders' merchant Travis Perkins from 1,390.0p to 1,430.0p, stating the group was recovering ahead of its expectations.

Berenberg said the pace of recovery in do-it-yourself and repair, maintenance and improvement spending had been "astonishing" and ahead of its expectations but stated that it was difficult to say whether or not it could be sustained in the second-half as pent-up demand rolls off.

However, the analysts believe their forecasts for Travis Perkins were "not demanding", assuming no further lockdowns take place.

"Moreover, the temporary increase in the stamp duty threshold and the Green Homes Grant in the UK are likely to provide further tailwinds," added the German bank.

The analysts also highlighted that with Travis Perkins' shares at a 14% discount to the domestic sector, they still see the firm's risk/reward scenario as being "attractive", leading them to reiterated their 'buy' rating on the stock.

Barclays initiated coverage on shares of food producer Cranswick at ‘underweight’ with a 3,500p price target on Thursday as it said it expects a slowdown ahead.

The bank said Cranswick's growth is likely to decelerate and margins moderate in the near term due to three key factors.

Firstly, it pointed to a shift from 'premium' to 'value' within own-label food as the UK economy enters a recession. Second, it noted that pork prices are normalising from a cyclical peak, which combined with increased competition among retailers could reverse recent price gains.

Finally, Barclays said labour inflation has picked up and Covid-19 has led to incremental costs in the supply chain.

"Given this backdrop, we do not see how Cranswick can recover costs from consumers who are unlikely to accept price increases and retailers who will be looking to recover their own higher costs."