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Broker tips: Intertek, Crest Nicholson, Redrow
(Sharecast News) - Analysts at ShoreCap raised their profit estimates for Intertek despite concerns around the product testing and inspection specialist's ability to deliver on its targets.
At its last Capital Markets Event, the company had guided towards mid-single plus digit sales growth at constant currencies, alongside margins at the earnings before interest and taxes level of 17.5% and above.
Among other things, ShoreCap noted how profitability was visible to clients in competitive markets, which over time meant that they would trend towards Intertek's cost of capital.
Its ability to retain staff was another source of concern.
On the flip-side, there were "attractive" opportunities to be had in new business areas, including in the likes of ESG and corporate energy efficiency.
Their estimates for the company's adjusted earnings per share in 2023 and 2024 were raised by 4% and 10%, respectively.
"This leaves fundamental valuation metrics relatively attractive to our minds,though we see risks to guidance, particularly on margins.
"We watch for delivery,noting a cash flow derivedfair value estimate of 4200p. HOLD."
Analysts at Berenberg turned more positive on UK homebuilders, not least because the worst-case scenarios for house price deflation had been averted.
They also noted the relative improvement over recent months in sales rates, which supported pricing, even as modest build cost deflation was set to occur in 2024.
In particular, they upgraded their recommendations for shares of Crest Nicholson and Redrow, because their asset-backed valuations screened best within the group.
Affordability had also improved, estimating that mortgage payments had fallen to approximately 40% of a typical new homebuyers' earnings.
A "material" fall over time in average land prices was also anticipated, as were new government support measures for the new-build housing market before the end of the year.
The analysts marked up their target price for shares of Crest Nicholson from 220.0p to 310.0p and for Redrow from 466.0p to 643.0p.
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