Canaccord Genuity raises target price on Eurocell

Canaccord said Eurocell had delivered "a stellar set of interim results", driven by "a strong market recovery and market share gains", with both of its divisions delivering an "impressive profit outcome" that was "significantly ahead" of 2019 comparatives.

The Canadian bank, which reiterated its 'buy' rating on the stock, highlighted that despite challenges relating to supply-side issues and inflationary pressures, Eurocell managed to do "a very good job" securing raw materials, servicing customers and passing on cost inflation.

Canaccord also pointed out that despite higher capex, including £1.0m for its new warehouse and £2.0m to expand extrusion capacity, the group ended the period with a "modest" net cash balance.

"Trading since the end of June has continued to be robust, with management increasingly confident that these good market conditions will continue for the foreseeable future, as the industry is operating at around full capacity and lead times grow," said Canaccord.

"We increase our underlying 2021E earnings estimates by close to +10% and expect a modest net cash position in 2022E. The strong trading conditions look set to continue into 2022 and the group continues to make good progress investing for growth with new branches, new products, account wins all likely set to support good top-line growth for the foreseeable future, with strong operational leverage as it benefits from recent investment in capacity."