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Halfords to see 80% upside for Liberum over good profit recovery

The broker said the current share price implies a long-term sales decline of 8% per annum, “which does not make sense”

Halfords Group PLC - Halfords to see 80% upside for Liberum over good profit recovery

Halfords Group PLC (LON:HFD) shares offer 80% upside from their current levels, analysts Liberum said as the retailer could see a good profit recovery.

The broker said the current share price implies a long-term sales decline of 8% per annum, “which does not make sense”, and reiterated its target price of 250p.

READ: Halfords remains a strong ‘buy’ for some City brokers but other analysts see profit risk

Last week’s 22% tumble was likely due to management’s cautious profit scenarios, analysts said, though the car parts and bike seller is making financial, operating and strategic progress paving the way for a more service-led, higher margin, better returns business.

Shareholders may soon see the dividend reinstated, supported by strong cash flow also allowing for a step-up in capital expenditure.

Liberum expects a £68mln adjusted loss before tax in the year to next March with a 10% fall in like-for-like revenue, margin dilution from higher sales in the cycling division and a £20mln COVID-19 charge.

However, this is forecast to swing to a £40mln profit in the year to March 2022, supported by sales just 2% below pre-pandemic levels at £1.1bn.

In last week’s results, Halfords modelled three scenarios: the first will see an underlying loss before tax of £0-10mln, the second and third profits of £0-10mln and £10-20mln respectively, based on revenue down 9.5%, 7.5% and 5% respectively.

Shares jumped 4% to 144p on Monday late morning.

Quick facts: Halfords Group PLC

Price: 157 GBX

LSE:HFD
Market: LSE
Market Cap: £312.61 m
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