Broker tips: Coats, Bunzl, HSBC

(Sharecast News) - Analysts at Berenberg slightly raised their target price on thread manufacturer Coats Group from 90.0p to 100.0p on Monday after the group's recent results demonstrated "a strong performance". Berenberg noted that revenues at Coats were up 10% year-on-year on an organic basis and margins were up 120 basis points at 14.8% despite "a challenging macroeconomic backdrop".

The German bank also highlighted that short-term pressures from customer destocking and cost inflation should ease into H223 and stated it continues to see Coats as "a long-term winner" with an attractive earnings growth profile.

"Having taken a further 1% of share in thread, Coats now accounts for 24% of the market - positioning it well to outperform - while the group's acquisitions of Rhenoflex and Texon should improve resilience and open up the addressable footwear market," added Berenberg, which reiterated its 'buy' rating on the stock.

"Coats' shares currently trade on just 11.5x (9.3x FY24 P/E), which we believe is undemanding for a global market leader. Furthermore, the shares offer an attractive 8.1% FY24 FCF yield, with significant upside potential to FCF forecasts if the group is able to trigger its 'switch-off' mechanism on pension funding cashflows (as per the above)."

JPMorgan Cazenove upgraded Bunzl to 'overweight' from 'neutral' on Monday, lifted its price target on the stock to 3,375.0p from 3,250.0p and placed the shares on "positive catalyst watch" going into the first quarter trading update on 26 April.

JPM said that following Bunzl's full-year results and London roadshow, it was revising the story as it finds itself positive for 2023 relative to its wider sector.

The bank highlighted three key positives - the fact that pricing remains positive, that leverage finished 2022 at a record-low level, and that the valuation has normalised relative to the market and that it now sees some upside, catalysed by earnings momentum.

In its 2023 estimates, JPM was 4% above company-compiled consensus at EBITA and EPS. Compared to current Bloomberg consensus EPS, JPM was 3% above.

Analysts at Bank of America reiterated their 'buy' recommendation on shares of HSBC telling clients that the lender was "built for times like these".

In particular, Bank of America highlighted the lender's $327.0bn of cash on hand and $184.0bn of securities with a maturity of under a year, which combined were 4.3 times the bonds it held with a maturity of over five years.

BofA also noted how the liquidity coverage ratios of its key operating entities were between 143-247%.

"We see the defining characteristic of HSBC as the quality of its deposit base, built to withstand stress when there was no central bank backstop in Hong Kong or many Asian markets for most of its history," they said.