Broker tips: Marshalls, CleanTech Lithium

Analysts at Berenberg lowered their target price on construction outfit Marshalls from 380.0p to 280.0p on Tuesday and said further risks remained.

Berenberg said Marshalls' profit warning last week was "disappointing", in its view, damaging the group's reputation within the sector as a "more resilient" play.

With leverage at the highest in its coverage, its debt floating and exposed to rising rates, and further downgrades likely from a slowdown in the new build residential market, Berenberg said it was struggling to "turn more optimistic" on the stock.

Although the group cut its expectations for the 2023 trading year to broadly in line with its prior forecasts, Berenberg has now cut its assumptions again, leaving it 10% below new guidance.

Berenberg added that following the group's profit warning, it now expects leverage to rise to 1.6x EBITDA at year-end and de-lever to just 1.5x at year-end 2023.

"This leaves Marshalls as the most levered company in our UK building product coverage, limiting scope for further material M&A and/or cash returns over the next 12 months," concluded Berenberg.

Analysts at Canaccord Genuity initiated coverage on AIM-listed lithium exploration and development company CleanTech Lithium on Tuesday with a 'speculative buy' rating and a 290.0p target price.

Canaccord said the Northern Chile focussed company's Laguna Verde and Francisco Basin sites could be "standout assets" within the sector and expects Laguna Verde's resources to underpin a 30+ year life.

The Canadian bank stated that due to a lack of evaporation ponds, existing infrastructure and prefabrication of large plant components, it estimates low capital intensity of approximately $16,000 per tonne, with operating costs of $4,000 per tonne, while investment returns were predicted to be "rapid", with a fast ramp-up and strong margins underpinning approximately $150.0m-200.om in free cash flow per year from the first year of operation.

"DLE allows the company to minimise aquifer depletion, with a smaller geographical footprint than conventional evaporation brines, and the availability of renewable power should allow the company to pursue a target of close-to-zero emissions," noted Canaccord.

"There are also no indigenous communities within ~2 hours of the area. We believe these ESG credentials bode well for permitting at a time when the Chilean government has a strong focus on sustainability," added the analysts.