Broker tips: Diageo, Go-Ahead Group, UDG Healthcare, Ilika
Citi lifted its price target on Diageo on Thursday to 3,325p from 3,200p following the drinks maker’s trading update.
The bank, which maintained its 'neutral' rating on the stock, updated its model on Diageo "to take account of the surprise trading update and new share buyback programme".
It lifted its FY21 organic EBIT growth estimate to +15.1% from +12.2% previously. Citi also increased its FY21 clean earnings per share estimate by 2.2% to 116.3p and its FY22 EPS estimate by 1.1% to 128.4p, versus the consensus of 125.8p.
"Having lagged other beverage stocks through Q1 earnings season and given further evidence of impressive trading momentum and the robustness of spirits business models, we are not surprised by the positive share price reaction," it said.
Analysts at Canaccord Genuity hiked their target price on public transport operator Go-Ahead Group from 1,135.0p to 1,540.0p on Thursday, stating the group was now in the process of preparing for "a strong recovery".
Canaccord said the Covid-19 pandemic continued to have "a significantly negative impact" on Go-Ahead's financial performance but noted prospects were now improving as the UK's vaccination programme would likely" bring the pandemic under control" in the coming months.
While the Canadian bank stated Covid-19 may have "a lasting impact" on travel patterns, it believes "a significant proportion" of the company's pre-pandemic traffic will return and stated that if not, it could also "right-size" its operations in order to restore and protect profit margins.
"Despite a strong recovery over the past 12 months, the shares trade at a discount to pre-pandemic levels of close to 50%. We retain our 'buy' recommendation," concluded Canaccord.
RBC Capital Markets downgraded its stance on shares of UDG Healthcare from 'outperform' on Thursday as it lifted the price target to 1,023.0p from 940.0p, bringing it in line with the offer received by private equity firm Clayton, Dubilier & Rice, which it reckons will go through.
The bank said its leveraged buyout model implies that spinning off Sharp early and driving some cost synergies with Huntsworth could lead to a mid-20s internal rate of return for CD&R, implying that they could afford to pay more.
"However, with few large-enough private equity firms that own assets in this space, the UDG board recommendation, as well as little risk of unmanageable antitrust issues given the fragmented nature of the market, we continue to believe that shareholders will accept CD&R's 1,023.0p/share bid," RBC said.
"This becomes our new price target, with our rating falling to 'sector perform'."
Analysts at Berenberg initiated coverage on solid-state battery technology outfit Ilika at 'buy' on Thursday, stating the group was "taking batteries to the next level".
Berenberg stated Ilika was on the verge of ramping up commercial production of its small-form-factor Stereax batteries and had made "good progress" towards scaling production of its larger Goliath offering.
The German bank also highlighted that accessing the electronic vehicle market would be "transformational" for Ilika, which already has "strong relationships" with automotive original equipment manufacturers and manufacturing partners.
While Berenberg said it thinks the company was still "at an early stage", it also believes the balance of risk and reward to be "compelling" and issued Ilika with a 275.0p target price.