Broker tips: Bunzl, Halfords

Analysts at ShoreCap reiterated their 'buy' recommendation for shares of Bunzl ahead of the value added distributor's first half results.

In a research note sent to clients, analyst Robin Speakman cited the company's "strong" management culture, the resilience of its business model to economic cycles, cash generation and ability to source and integrate acquisitions.

"Prospects to us continue to look assured," he said, further pointing out how forecasts were still drifting upwards, a process he expected would extend through the back half of 2022, including through non-organic growth.

"A premium rating is deserved, in our opinion. On current forecasts we see fair value at 3450p – clear >10% upside for this quality global group, ahead of any further upgrades."

Bunzl was scheduled to release its 1h numbers on 30 August.

Halfords shares tanked on Tuesday after Panmure Gordon downgraded the stock to ‘hold’ from ‘buy’ and slashed the price target to 150p from 300p.

"As one of the most operationally and financially geared operators in our coverage universe, Halfords (HFD) is naturally at some risk coming into the period of significantly increased pressure on consumer spending in 2022," it said.

"We support much of the current strategy but we feel focus mainly on the AutoCentres business has left the Retail division somewhat exposed in the current environment."

Panmure said Halfords has actual cash after its 2021/22 placing but also significant lease exposure and thereby elevated lease adjusted debt gearing.

"We are reducing our forecasts marginally ahead of the 7th September trading update and neutralising our target price (50% cut) and recommendation," it said. "We believe that there is significant upside in HFD and that it is unlikely to go bust, however harsh the coming winter is for UK retailers. But we prefer to wait for better visibility."