Berenberg slightly raises target price on Breedon

Berenberg noted that Breedon's revenue was up 8% year-to-date, including 5% like-for-like, while revenue for the four months ended 31 October was up 4% year-on-year, or 1% on a like-for-like basis.

The German bank stated that volumes in the industry had been "tough" thus far in 2023, but said Breedon has been "getting on with business" and had benefitted from "strong" operating efficiency and pricing. It added that Breedon trades at a 10.0x 2024E price-to-earnings ratio and 8.5x underlying earnings.

"Given this backdrop, management guided 2023 ahead of prevailing market expectations, and as such we raise our numbers by 2-4% over the forecast period, today," said Berenberg, which reiterated its 'buy' rating on the stock.

Berenberg added that Breedon was "very well positioned" in the UK and Irish markets, in its view, given its asset backing, level of vertical integration, and exposure to "more robust" end-markets.

"H1 pre-IFRS 16 net debt came in at £171.0m, 0.7x EBITDA. We now expect year-end net debt of circa £128.0m, slightly lower than previously and giving plenty of headroom. We think management will be keen to progress the acquisition pipeline at some point, ranging from additional routes to market in the UK to larger moves into the US," concluded Berenberg.

Reporting by Iain Gilbert at Sharecast.com