HSBC ups target price on 'market leader' Pets At Home

Analysts ay HSBC upped their target price on pet supplies retailer Pets at Home from 160p to 190p on Thursday after the group's full-year results a day earlier confirmed the successful completion of its turnaround strategy in retail and some good progress in its vet business.

HSBC, which also maintained its 'buy' rating on the company, highlighted Pets at Home's like-for-like growth, which came in at 6.5% with a tough comparative in the previous year - making the 2-year LFL an impressive 14% - as reason to have "little doubt" about the structural integrity of the firm's retail model.

"Providing execution remains focussed and strong, we can expect retail to deliver steady growth and strong cash generation going forward. Such a business, with clear competitive advantages, should command a premium valuation if well run," said HSBC.

The London-based bank did note there was still work to be done on the major restructuring of Pets at Home's joint-venture veterinary business, but said the review seems to have been "thorough and drastic enough" to ensure the unit exits the restructuring on a more stable footing.

HSBC said: "Overall results beat expectations by around 8% at the profit level with positive news at the sales, profit and cash flow level. As a result, we increase forecasts by around 5%.

"Importantly, persistent momentum through the past 2 years now reassures on the long-term prognosis for the group and we can begin to look with some confidence at what the future might look like."

HSBC concluded by saying that providing Pets at Home's strong execution continues, the group's future should reflect that of "a strong market leader in a defensive, growing industry with attractive cash generation".