Numis Securities has upped its rating for Ibstock PLC (LON:IBST) to ‘add’ from ‘hold’ on valuation grounds following the brickmaker’s share price slide on Wednesday after a profit warning.
In a note to clients, the City broker’s analysts pointed out that, in an unscheduled trading update, Ibstock reported that its full-year underlying earnings (EBITDA) is expected to be in a range of £121mln-£125mln, which compared to their forecast of £132mln.
READ: Ibstock warns earnings will be hit by Beast from the East, lower-than-expected output
Based on this, the analysts added, they have reduced their 2018 and 2019 earnings per share estimates by 9-10%.
They pointed out that after Ibstock’s 13% share price decline yesterday, the group now trades on a 2019 price/earnings (P/E) ratio of 11 times and a dividend yield of 7%.
The analysts said however, given strong underlying brick demand, they have set their target price for Ibstock shares at 270p, down from 310p previously, which represents a 2019 P/E ratio of 12.5 times and yield of around 6%.
They added that, as this represents 12% upside to the current share price, they have therefore moved up to an ‘add’ recommendation.
In late morning trading, Ibstock shares were 2.1% higher at 246p.