Deutsche Bank has upgraded Persimmon PLC (LSE:PSN) to 'buy' from 'hold', arguing that share price weakness has left the housebuilder too cheap despite a run of forecast downgrades.
Chris Millington nudged his target price down to 1,403p from 1,419p, still implying about 20% upside from the last close of 1,166.5p.
The analyst described the interim figures as robust, with 13% volume growth doing enough work to absorb 210 basis points of gross margin pressure and deliver a 3% rise in pre-tax profit.
Persimmon expects to face the same build cost inflation squeezing the rest of the sector, but management intends to offset it progressively through self-help measures and continued top-line growth.
Millington has cut his pre-tax profit forecasts by 3% for this year, 13% for 2027 and 14% for 2028 to reflect the updated guidance.
Even after those reductions, he now models broadly flat profits between 2025 and 2027, in contrast to the notable declines he sees elsewhere among the listed housebuilders.
The upshot is an average return on equity of roughly 9% across 2026 to 2028, around 50% higher than relevant peers.
That level of return, in Millington's view, comfortably supports a rating of about one times net tangible assets, the value of the company's physical assets after debt and intangibles.
Crucially, he argues that valuation embeds no allowance for any recovery in the housing market or for Persimmon's longer term profit potential.
The stock had already fallen far enough since the bank's earlier downgrade to hold for the risk-reward to flip back in investors' favour.
In afternoon trading, the shares were trading sideways at 1,158p.
