Broker tips: OSB Group, RS Group, National Grid, THG

(Sharecast News) - Analysts at Berenberg raised their target price on financial services firm OSB Group from 750.0p to 800.0p on Monday, stating the group was "sustainably strong" and "unsustainably cheap". Berenberg stated OSB Group generates a sector-leading return on tangible equity of more than 20%, with the sustainability of these returns being underpinned by "structurally growing and cyclically-resilient demand for its lending", as well as its "significant pricing power and strong asset quality".

The German bank, which reiterated its 'buy' rating on the stock, noted that despite the "increasingly proven sustainability" of OSB Group's returns, and an annual total yield of roughly 15%, the stock trades on just 4.4x its estimated full-year 2024 earnings per share.

"This is unsustainably cheap, in our view, and our price target implies circa 65% upside," said Berenberg. "Considering our expectations for a circa 20% RoTE, 7-8% dividend yield and annual buybacks of circa 8%, OSB Group is materially undervalued."

RBC Capital Markets upgraded RS Group to 'outperform' from 'sector perform' as it said the stock's risk/reward ratio was now more favourable.

RBC noted that the stock has underperformed the FTSE 100 by around 30% since peaking on bid speculation last August.

"Growth expectations have reduced, the CEO and US management uncertainty has been removed, RS1 has done an excellent job on margins and valuation has come back to an attractive level," it said.

"We continue to see RS1 as a long-term winner with the potential for further share gains and the strong balance sheet provides options in the current environment."

The bank maintained its 1,000.0p price target on RS Group, which was formerly known as Electrocomponents.

Analysts at JP Morgan reiterated their 'overweight' recommendation for shares of National Grid in anticipation of increased investor focus on the company's "solid" balance sheet.

Being two years into the electricity and natural gas provider's five-year guidance, JPM expects investors will increasingly focus on the group's balance sheet as network investment accelerates towards the second half of the current decade.

JPM estimated that National Grid will be able to deliver increased capital expenditures, including a "meaningful" step up in fiscal years 2027-28, even as dividend payouts kept up with CPIH inflation. It also claimed National Grid will manage to do both without raising capital nor any "major risk" of credit downgrades.

"Shares have been strong YTD, yet we expect outperformance should continue given regulatory visibility and a solid balance sheet."

Liberum lifted e-commerce group THG to 'buy' from 'hold' on Monday, hiking its price target to 220.0p from 55.0p as it moved to a sum of the parts valuation.

Liberum stated the company was now "in play" after confirming it had received a highly preliminary and non-binding indicative takeover proposal from private equity firm Apollo Global Management, noting that the approach by Apollo brought into light the sum of the parts valuation.

"While there is no certainty a deal will transpire, we highlight in this note just cheap the shares are," it said.

"There is no doubt the shares have been hit hard due to numerous factors and the current market, despite today's circa 40%, is still significantly below what our SOTP suggest."

Liberum said that if there was no potential deal, then the focus should be on free cash flow, where there are now several positive signals. It added that results on Tuesday could be a further catalyst, bringing with them hope of heightened disclosure.