Shares in Wickes Group PLC (LSE:WIX) were 2% higher at 167p after an upgrade from Panmure Liberum, with analysts raising their recommendation from 'hold' to 'buy' and increasing their price target to 200p from 185p.
The upgrade reflects stronger-than-expected momentum in the builders' merchant's TradePro business and a recovery in its Design & Installation (D&I) division, which has been struggling in recent years (Panmure Liberum).
TradePro, Wickes' membership programme for trade customers, now contributes 40 per cent of the company's profit base. Membership growth has been steady, and existing members are spending more.
Analysts at Panmure Liberum see further upside, with an estimated 2.3m trade professionals in the UK yet to sign up.
If momentum continues, they believe TradePro alone could generate up to £100m in earnings before interest, tax, depreciation, and amortisation (EBITDA) within five years (Panmure Liberum).
Meanwhile, the D&I business, which focuses on fitted kitchens and bathrooms, appears to be turning a corner.
Sales in this segment have been weak, but analysts argue that pent-up demand could drive a 40 per cent increase in profit before tax (PBT) forecasts for 2026. Their report highlights a cumulative £113m shortfall in D&I sales since 2019, suggesting a rebound is overdue (Panmure Liberum).
Despite inflationary pressures, Panmure Liberum has upgraded its profit forecasts for Wickes. PBT estimates for 2025 have been lifted by 3 per cent, while the 2026 forecast has jumped 19 per cent.
The firm argues that Wickes' valuation is not stretched, even after the recent re-rating. They point out that if D&I continues to improve, Wickes' price-to-earnings ratio for 2026 could drop below eight times earnings, which they see as attractive (Panmure Liberum).
The upgrade comes amid broader changes in the home improvement market. Wickes' rivals have faced difficulties, with Wilko and CTD Tiles collapsing, while Homebase has scaled back its presence.
This has created an opportunity for stronger players. Analysts also highlight Wickes' efficient business model, with high stock turnover and margins significantly above its competitors, as key advantages (Panmure Liberum).
At 163.6p per share before the upgrade, Wickes has been trading at a discount to its sector.
With a 12 per cent free cash flow yield and a steady dividend, Panmure Liberum sees room for further upside. The stock market will soon test that optimism when Wickes releases its full-year results in March.