Dixons Carphone offers 'solid and realistic' strategy, thinks HSBC

Dixons' new management aims to deliver market share gains, implying positive like-for-like growth in broadly flat markets, expand EBIT margins to 3.5% on the back of £200m in cost savings, and generate £1bn of free-cash-flow over the next half a decade.

HSBC felt DC' had presented a "detailed and clear strategy" with realistic targets that could create "substantial value" on a five-year view.

The bank's analysts felt the company could be "highly cash generative" with its EBIT margin at 3.5% and said that taking working capital into account, it believes management should "comfortably exceed" their £1bn free cash flow target.

HSBC, which lowered its price target on the group from 195p to 150p, said the new strategy had clearly been "thoroughly thought through" and noted that it plays on management's core competencies in digital, credit and systems.

"We can take confidence from the robust strategic position new management inherit," said HSBC.

However, the bank said it "cannot think of a successful retail turnaround in the past five years" - something it noted would likely temper initial enthusiasm.

"We can take confidence from the robust strategic position new management inherit. With DC already a market leader, gaining share and with high NPS this seems a case of making a good company great rather than rescuing a failing business."