JPMorgan upgrades Travis Perkins to ‘overweight’, hikes price target
JPMorgan Cazenove upgraded Travis Perkins on Monday to ‘overweight’ from ‘neutral’ and hiked the price target to 2,000p from 1,600p.
The bank said that while the shares are up 31% year-to-date, they have only largely recovered the poor performance of last year, underperforming the European Merchants/Distribution/Retail names.
"Meanwhile, the group has simplified its structure, leading to significantly improved balance sheet and returns profile which, in our view, is not reflected in the valuation yet," it said.
JPM said it was upgrading the shares after resetting its forecasts following the simplification of the group and argued that there is "considerable" scope for a re-rating.
"Following the demerger of Wickes and disposal of the Plumbing & Heating business, the group’s strategy has become clearer, i.e. (i) to maintain and capitalise on its market-leading positions in the Merchanting business and (ii) invest in the fast-growing Toolstation business," JPM said.
"In our view, the end-market outlook and inflationary backdrop is supportive even if 2022 faces tougher comps."