Ashtead Group PLC (LON:AHT) has been upgraded to ‘buy’ from ‘hold’ by analysts at Deutsche Bank (DB), who said the construction equipment rental firm had a “significant growth path ahead” thanks in part to its “game changing” specialty business.
In a note on Thursday, the German bank also upped its price target for the FTSE 100 firm to 4,100p from 3,000p, saying the specialty segment offered “less cyclical, more defensive revenue streams, and plays in large and underpenetrated markets”, adding that the business arm now accounted for around 25% of the company’s revenues.
READ: Ashtead raises guidance after first-half profits fall less than expected
More specifically, DB said there are a number of “powerful secular trends” in the key verticals of power and heating, ventilation and air conditioning (HVAC) that they said supported growth and an “ongoing shift” towards equipment rental.
“We believe the stock should trade in line with some of the higher quality names in the sector”, DB said, while they also expected “a normalisation of activity” in the macro environment assuming the vaccine rollout was effective in 2021.
However, DB said this “remains hard to predict” and is “likely priced in” to the stock.
Shares in Ashtead rose 1.4% to 3,762p in late-morning trading.