Canaccord Genuity nudges up target price on Barratt Developments

Canaccord said Barratt's update confirmed that demand had remained "strong", with the group seeing a "good spring selling season", as expected, as build rates came in better than expected, leading the firm to raise volume guidance for the current financial year.

While the analysts noted that Barratt was seeing higher build cost inflation into the 2022 trading year, it was also seeing "decent house price inflation", which left it confident of being able to offset expected cost inflation.

"Looking to FY2022, management sounded more confident that volumes would reach FY2019 pre-Covid levels with more sites and good build rates driving volumes rather than higher sales rates. There seems to be very good visibility over the outcome for FY2021 and we are more confident in volumes exceeding 17,000 in FY2022," said Barratt.

The Canadian bank increased its profit estimates to reflect higher volumes, but factored in higher costs dampening 2021's expected profit increase, and also increased net cash estimates in line with guidance.

"The medium-term volume outlook continues to look good to us, and the financial metrics and profits should also move up commensurately," concluded Canaccord, which kept its 'hold' rating on the stock.