Liberum upgrades Pets at Home to 'buy' after results

Liberum upgraded Pets at Home to ‘buy’ from ‘hold’ on Thursday, lifting the price target to 510p from 460p, driven by the broker’s new, higher forecasts following the company’s preliminary results.

The broker upped its FY22 pre-tax profit estimate by 7.5% to £126m, which sits slightly above the mid-point of the £120m-130m guided range. It lifted its FY23E pre-tax profit forecast by 13.2% to £144m.

"We acknowledge the current premium valuation (CY21 PER 24x), yet see this as justifiable for the 13.7% FY20-24E profit before tax compound annual growth rate we now forecast," it said.

"There is upside risk to this as PETS’ multiple self-help levers look set to drive further outperformance versus the UK pet care market’s accelerating growth."

Liberum said the re-calibration of the Vet Group is now complete with impacts fully annualised meaning greater leverage benefits, higher visibility on profit trajectory and enhanced cash flows to support an already "very strong" balance sheet.