Broker tips: Tyman, Ibstock, HSBC

Analysts at Canaccord Genuity raised their target price on construction materials group Tyman from 400.0p to 450.0p on Tuesday, citing recent sector and macro news flow that they felt was pointing to "a strong recovery" in demand.

Canaccord stated the recovery in Tyman's key markets looked to be "well embedded" and "more than just a result of stronger order books and pent-up demand", as feared earlier in the year.

The Canadian bank, which stood by its 'buy' rating on the stock, noted that underlying demand in the US and UK appeared to be "very strong" in the housing and repair, maintenance and improvement markets and reiterated that it had already increased its "cautiously struck" UK and US estimates earlier in 2021.

"Housing and RM&I markets in the US are very strong (housing permits above 1.7m and a strong NAHB survey) and the recent announcement of Biden's infrastructure plan should be incrementally supportive over the medium term," said the analysts.

"While cost inflation and servicing customers continue to be a challenge for the industry, a backdrop of strong demand should be conducive for pricing and result in good overhead utilisation. Recent industry news flow in the UK shows good underlying demand and supports our higher estimates for the UK business."

Analyst at Berenberg only slightly nudged up their target price on construction firm Ibstock from 230.0p to 255.0p on Tuesday, stating a new-build recovery appeared to already be priced in.

While Berenberg expects housebuilding activity to continue to recover over the course of the year, meaning it does believe that an upside risk to forecasts exists, it also believes that this has already been reflected in the group's shares. It also reckons better risk/reward scenarios exist elsewhere in the sector.

The German bank, which reiterated its 'hold' rating on the stock, did acknowledge that first-quarter trading highlighted the strength of the new-build recovery.

"Although not quantified, the group noted that it had made a good start to the year, trading 'modestly ahead of expectations', with good demand from both the new-build housing and the renovation, maintenance and improvement end-markets," noted Berenberg.

"Industry data suggests volumes till February were down just 6% year-on-year. Moreover, although increasing sequentially, inventory levels are -30% year-on-year and at their lowest levels since 2014. With demand in the new-build and RMI sector encouraging, production levels should continue to rise and drive margins back to pre-Covid-19 levels."

Jefferies reiterated its 'hold' rating on HSBC on Tuesday, following the publication of the lender's forecast-beating first-quarter numbers.

The bank, which upped its target price for the blue-chip last week to 414.0p from 400.0p, said the results were "strong".

It noted: "HSBC has produced adjusted first-quarter pre-tax profit of $6.4bn, 39% ahead of Jefferies estimates and 49% of consensus on revenue and credit. The largest variance was on credit costs, where a net $400m release reported – management now guide that 2021 credit costs are expected to remain below medium-term budget of 30-40 basis points. Of the $400.0m net credit release, $288.0m was attributed to the UK."

Jefferies also noted that adjusted revenue of $13.3bn was 5% ahead of estimates on non-interest income, while adjusted costs were 6% short of expectations.

"For 2021, management expect costs broadly stable versus 2020, but may adjust performance-related pay accrual to reflect the performance of the group. We note that return on tangible equity in the first quarter was 10.2%."