Berkeley Group Holdings PLC (LSE:BKG) remains RBC Capital Markets' preferred UK housebuilder, with the broker raising its share price target as the increased focus on shareholder returns and cash generation should continue to support the shares despite a subdued housing market.
RBC increased its price target to 4,100p from 3,850p and reiterated its 'outperform' rating following Berkeley's annual results, reflecting higher estimates for tangible book value as it expects the company to favour share buybacks over dividends.
The broker made only minor changes to profit forecasts and continues to expect cumulative pre-tax profit of £1.42 billion between the 2027 and 2030 financial years, in line with management's guidance for more than £1.4 billion. Profits are expected to be slightly more heavily weighted towards the 2027 financial year.
Current trading reflects an uncertain market, analyst Anthony Codling acknowledged, with off-plan sales softening because of a lack of urgency among purchasers.
Management remained positive on the long-term outlook for London, where housing undersupply persists.
Codling noted that around 50-60% of Berkeley's buyers continue to come from outside the UK.
He said Berkeley's new strategy of prioritising cash generation over short-term profit growth, with £640 million earmarked for shareholder returns between September 2026 and September 2030, of which £112 million has already been returned.
Around two-thirds of future distributions to come via buybacks rather than dividends, with the lower share price making repurchases more attractive.
