Canaccord Genuity nudges up target price on Berkeley Group

Analysts at Canaccord Genuity nudged up their target price on homebuilder Berkeley Group from 5,230.0p to 5,240.0p on Thursday, stating the group was "well positioned with confidence returning".

Canaccord said Berkeley had delivered "a sound set of full-year results", slightly better than it had expected.

The Canadian bank noted that Berkely remained "in investment mode" and was in production on most of its big, complex sites, and added that while the firm has "generally postponed" the opening of developments until travel and the wider economy opens up more, current trading was seen as being good, with interest and enquiry levels in London now ahead of pre-pandemic levels.

While Canaccord acknowledged that building material cost inflation was accelerating and longer lead times for some products were appearing, it added Berkeley "appears on top of managing its challenges well", with management reiterating its long-term profit guidance and the firm on track to deliver its targeted 50% increase in housing delivery by 2024-25 from 2018-19 levels.

"There remains some concern over the medium-term pricing and attractiveness of London housing, particularly flats, but management is confident that London will bounce back and industry supply looks woefully below target levels. Assuming pricing holds up relatively well, as we assume it will, the group looks set to deliver a significant step-up in units and profits beyond the next few financial years," said Canaccord, which also reiterated its 'buy' rating on the stock.

"We tweak our estimates and now expect underlying profit before tax to be £520.0m and £540.0m for FY2022E and FY2023E respectively. We expect net cash to reduce to circa £800.0m by the end of FY2022E as the Group invests in WIP And returns significant capital to shareholders."