Berenberg ups targets for Vistry but risks remain

Berenberg has hiked its target price for partnerships-focused affordable-housing builder Vistry by 15% but kept a 'hold' rating on the stock, saying the company is "well positioned, but delivery risk remains".

The broker has lifted its target for the shares from 894p to 1,030p, but said the recent strong share-price performance means the stock offers fair value for now.

Vistry's shares, up 2% on Thursday at 1,242p, have now risen nearly 37% since the start of 2024 and by 70% over the past 12 months.

"We do not propose that Vistry’s new strategic model is better or worse than its traditional peer group, but it is clearly differentiated," the broker said.

"By establishing an operating framework that will deliver a significantly higher proportion of affordable housing (as well as private rented sector housing) than the traditional model, Vistry is well positioned to benefit from a growth tailwind given the structural demand in that market segment – a clear positive, in our view."

Furthermore, this partnership model reduces sales risk – 65% on a typical site is already pre-sold – and the company's capital invested in each development.

However, Berenberg still holds reservations: "Our primary concern is operational delivery, noting that ambitious volume growth places challenges on the group in terms of land (sourcing and achieving appropriate planning), partners (agreeing contracts at appropriate volume and margin terms) and build (subcontractors and product quality) – all of which intensify more each year as volume output grows."