Inchcape races ahead as JP Morgan reiterates 'overweight'

Inchcape raced ahead after JP Morgan Cazenove reiterated its ‘overweight’ stance on the stock and added it to its European Analyst Focus List as one of its highest conviction OW calls.

JPM said the recent de-rating of the stock was unjustified as it pointed to the fundamentally attractive business model, high levels of cash generation and compelling trading multiples.

In the past 12 months, Inchcape has re-rated from 14x to 12x one-year forward price-to-earnings despite delivering on 2015 market estimates and guiding to another “solid constant currency performance” in 2016.

JPM said the automotive distributor and retailer has proven to be more resilient in its emerging markets businesses than many expected.

It has suffered from association with UK retail sector, but is fundamentally an international business with limited exposure to the British consumer, the bank said.

“Its focus on premium and luxury vehicles confers a competitive advantage both in emerging and in more mature markets. Its strong OEM partnerships are a key asset,” said JPM, adding that the company is well diversified by geography and revenue source.

The bank has a price target of 890p on the stock.

At 1000 BST, Inchcape shares were up 5.3% to 721.50p.