Berenberg slightly raises target price on Inchcape

Analysts at Berenberg slightly raised their target price on automotive distribution, retail, and services company Inchcape from 1,035.0p to 1,085.0p on Friday following the group's acquisition of Derco.

Berenberg stated that Inchcape's now completed acquisition of Derco marked "a strategic leap forward for the group" as it "significantly" increased its exposure to the fast-growing Latin American market and favourably continues its shift towards distribution, which now makes up 93% of adjusted operating profits.

The German bank upgraded its forecasts for the deal, with 15.2% and 20.5% accretion to full-year 2024 and 2025 adjusted earnings per share estimates, respectively.

"Despite a circa £1.0bn price tag, pro forma leverage at the end of FY22 will be just 0.6x net debt/EBITDA, and we expect cash generation to drive deleverage to just 0.1x net debt/EBITDA by FY24 end," said Berenberg, which reiterated its 'buy' rating on the stock.

"On our new forecasts, the shares trade on just 10.3x FY23 P/E (5.9x EV/EBITDA), which we think is an attractive entry point to the story."

Reporting by Iain Gilbert at Sharecast.com