Numis upgrades Grafton, says company has unique drivers

Grafton Group issued a disappointing trading statement, but things should not be taken out of context, a top broker said on Thursday.

Indeed, the builders merchant and DIY retailer may have an ace up its sleeve when compared with rivals, as the Irish recovery will remain a key (and unique) driver of profits, Numis believed.

Even after reducing their estimates, analysts Howard Seymour, Chris Millington and Christen Hjorth expected the company to clock annual profit growth of about 15% in 2015 and 2016. The UK market backdrop was also expected to improve.

“We therefore retain our view that Grafton has the best growth profile in the general merchanting space, and would use any weakness on this trading statement to increase holdings in the shares,” they said in a research note sent to clients.

The balance sheet remained strong, Numis added.

Seymour and his team upgraded their recommendation on the stock to ‘buy’ from ‘add’ and set a target price of 850p.