Dixons Carphone's improvements prompt Investec upgrade

Investec has upgraded Dixons Carphone from ‘add’ to ‘buy’ as the company’s core businesses improve and gain market share.

The investment bank on Wednesday said that should drive medium term profit growth despite continued softness in the Nordics.

“Ongoing self-help and market share gains characterise the near-term story at a time when DC faces a slower electricals market,” it said.

“Significant downsizing of its portfolio will help strengthen the underlying proposition & UK margins in our view (INVe: +25bps).”

Investec said the company’s valuation doesn’t reflect the attractive investment case given.

“1) EPS growth from ongoing restructuring & market share gains (INVe: 12% EPS CAGR CY15-17e vs. 9% for the sector); 2) better visibility on CWS’ growth, scale and contribution to group profits; and 3) attention turning to uses of cash as FCF generation should improve markedly in FY18e.”

Shares in Dixons Carphone were up 3.2p (0.70%) at 1101 GMT to 459.7p.