Berenberg lowers target price on Persimmon

Fundamentally, Berenberg still forecasts "a challenging market outlook", so it does not consider Persimmon's valuation to be "attractive enough" to turn more positive given current macro uncertainties.

Berenberg noted that trading continues to exhibit a recovery from the trough of Q4 2022, but said this still leaves customer demand "materially below" where it was a year ago.

The German bank also pointed out that Persimmon stated pricing has "remained firm" and that private average selling prices were 10% higher than a year earlier. However, while Berenberg believes this increase relates to favourable mix impact rather than underlying

house price inflation, it stated such resilience in pricing was nevertheless reassuring. Meanwhile, cost inflation remains a material headwind at 8-9% with Persimmon adding that it sees "limited signs of easing in the short term".

"We maintain the cautious view we have held on the stock and housebuilding sector since we took coverage in mid-2022 ... on

account, primarily, of the twin concerns of a significant deterioration in customer affordability and margin pressures," said Berenberg, which stood by its 'hold' rating on the stock.

"Moreover, in the face of such pressures, we have seen sector valuations – including Persimmon – as not attractive enough. Persimmon trades on 12x EPS, 1.1x TNAV with a 5% dividend yield."

Reporting by Iain Gilbert at Sharecast.com