Berenberg starts coverage of Ashtead at ‘buy’, shares jump

The bank said that alongside competitors, Ashtead has benefited from a 10-year trend toward leasing over ownership.

"In the medium term, it has significant exposure to structural growth drivers, and opportunities for less-cyclical growth," it said.

"Ashtead is currently trading at a rare discount to United Rentals and in line with its historical median, despite a positive outlook and lower cyclicality of growth.

"In our view, this offers an opportunity to invest in what we deem to be the highest-quality company in the rentals sector."

Berenberg said Ashtead is set to outgrow a market benefiting from leasehold trends.

It noted that S&P Global Market Intelligence forecasts a 3.4% compound annual growth rate for the equipment rental sector over the medium term.

"We think Ashtead will comfortably outperform on this metric and, more importantly, achieve the upper end of its 6-9% medium-term organic CAGR guidance," the bank said.

"We expect the group to benefit from its ability to capture a disproportionate share of the growth related to mega projects and data centre construction, and from increasing the sales contribution from Specialties, which will reduce revenue exposure to cyclical drivers."

At 0925 BST, the shares were up 3.1% at 5,712p.