JPMorgan Cazenove upgrades rating for Wickes owner Travis Perkins to ‘neutral’ from ‘underweight’

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JPMorgan Cazenove has upgraded its rating for Travis Perkins PLC (LON:TPK) to ‘neutral’ from ‘underweight’ and raised its target price for the builders merchanting group to 1,390p from 1,100p in a bullish review of the European Building Materials sector.

Late morning on Friday, the Wickes and Toolstation stores group’s shares were trading at 1,428p, down 0.7% on Thursday’s closing price

READ: Travis Perkins to return government coronavirus support cash from Wickes and Toolstation chains

The US bank’s analysts noted that the European Building materials sector has rallied from its lows hit last March, and has seen “an acceleration in performance into the start of the year, boosted by the market rotation into cyclicals, together with the value and reflation trade, the ‘blue wave’, renewed M&A as well as confident comments on recent trading.”

They pointed out; “This leaves the risk-reward more balanced, with the sector trading on 9.0x 12m forward EV/EBITDA, a 14% premium to the long-term average (mostly driven by a couple of light side stocks, but a 21% discount to the market. For 2021, we expect +20% LFL EBITDA growth on average, compared to the 11% decline in FY2020E, driven by continued volume recovery, partly offset by energy cost headwinds.”

Among other UK-listed sector players, the JPMorgan analysts also raised their target price for brick maker Ibstock PLC (LON:IBST) to 203p from 175p, while retaining a ‘neutral’ rating on the stock, and upped their target for FTSE 100-listed Irish building materials firm CRH PLC (LON:CRH) to 41 euros from 40 euros, repeating an ‘outperform’ rating.

But fellow UK-listed Irish firm Kingspan PLC (LON:KGP) had its target cut to 63 euros from 70 euros, with a ‘neutral’ rating maintained.

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