Berenberg cuts target price on Howden Joinery

(Sharecast News) - Berenberg lowered its target price on commercial furniture group Howden Joinery from 870.0p to 835.0p on Friday after the group noted that its outturn was more likely to be at the lower end of consensus estimates.

Berenberg noted that overall, management had maintained its expectations for the 2023 trading year. However, given recent macro weakness, it believes that pre-tax profits will be at the lower end of its £330.0m-365.0m target range, with the mid-point at £347.0m.

"As such, we update our model and reduce our numbers by 5-7% across the forecast period. More broadly, our view is that FY23 will be tough for all participants in the UK repair, maintenance and improvement and new-build markets, but that Howden is very well positioned on a multiyear view, can take share and can grow its business meaningfully from current levels," said Berenberg.

The German bank noted that there were no expectations for a strong volume recovery in these end markets in the 2024 trading year given the prevailing headwinds from higher interest rates, affordability, and consumer confidence. As a result, it believes that the UK kitchen market could be down a further 5% next year, with Howden volumes remaining broadly flat year-on-year.

In Berenberg's updated numbers, it sees UK like-for-like revenues for FY24 being 1.5% higher, driven entirely by price, and margins broadly flat year-on-year, as efficiency savings continue to offset investment in new depots, distribution, and growth.

"Howden currently trades at 12.9x FY24 P/E, 9.9x EBITDA and 10.8x EBIT. We believe that this is a relatively attractive valuation looking through the cycle towards a potential UK domestic recovery."

Reporting by Iain Gilbert at Sharecast.com