Berenberg ups target for Ashtead Tech on strong H1 momentum

Berenberg has hiked its target price for the shares of Ashtead Technology by over a tenth after the subsea equipment rental and solutions provider raised its full-year guidance last week.

"We continue to like the stock given Ashtead Technology’s structural growth potential, renewables exposure, strong market position, high margins and ambitious management team," the broker said.

The company reported on 4 September that first-half revenues were up 57%, while adjusted EBITDA surged 92%. It said the market outlook was buoyant, with customer backlogs at high levels, as it predicted full-year results would be "comfortably ahead" of previous forecasts.

Berenberg raised its EPS estimates for the next two years by 6-7%, given the combination of strong market conditions, good pricing and margin delivery.

"While a large proportion of Ashtead Technology’s revenue comes from the rental of equipment to customers, we believe that the company adds significant value from its product selection, availability and its application of technological know-how, as well as from servicing and assembling equipment, rather than just being a pure rental business. This model helps to drive strong pricing power, margins and returns," the broker said.

It pointed out that the shares currently trade at 13.7 times earnings forecasts for the year to March 2024, and just 10.7 times EBIT.

Berenberg raised its target price from 450p to 500p and maintained its 'buy' stance.