Berenberg upgrades Tyman to 'buy', cites attractive entry point

Berenberg upgraded its stance on shares of building products manufacturer Tyman to ‘buy’ from ‘hold’ on Wednesday and hiked the price target to 500p from 375p, citing an attractive entry point.

The bank noted that after a strong run over the past year, Tyman shares have pulled back 20% in recent months.

"We think the shares will outperform as management is focused on organic growth and margin expansion, the business is highly cash-generative with low leverage and potential for non-dilutive M&A, and it is supported by favourable macro tailwinds," it said.

Berenberg pointed out that historically, Tyman pursued an acquisition-led strategy, which contributed the vast majority of the revenue increase but also resulted in low organic growth.

"However, we think this is about to change. Management is now explicitly prioritising organic growth, installing a unified corporate culture and stepping up capital expenditure.

"At the same time residential construction (circa 80% of group revenues) is booming, while new-build housing and RMI activity are outperforming the broad economic recovery driven by pent-up savings, cheap mortgages and the ‘race for space’."

In the longer term, Berenberg said the structural undersupply of housing and ageing stock that has been underinvested in the US should underpin growth forecasts.

"Taken together, we think that there is upside risk to current consensus revenue compound annual growth rate of 3% from FY 2021 to FY 2023 (or +7% versus 2019 by 2023)."

At 1235 BST, the shares were up 8.8% at 451.50p.