Renovation activity in the UK has “recovered sharply” since the initial Coronavirus lockdown in the second quarter of last year, according to analysts at Berenberg, who added that the market remained “attractive…in the near and mid-term” for the UK’s construction firms.
In a note on Tuesday, the broker said current trends in the renovation-maintenance-improvement (RMI) market are “very encouraging” as increased time spent at home, record housing transactions and limited options for discretionary spending elsewhere suggested “a pick-up in “move and improve” activity for at least the next 12 months”.
READ: Wickes begins trading as separate company after Travis Perkins demerger
Berenberg added that in the long term they believed the UK government’s carbon reduction targets will “drive an increase in building refurbishment”, providing further upsides for stocks of companies in the sector.
In terms of specific firms, the broker hiked its target price for Grafton Group PLC (LON:GFTU) to 1,450p from 1,180p following what they said was a “very impressive” trading update from the group and the “supportive” end-market tailwinds, while Howden Joinery Group PLC (LON:HWDN) was raised to 910p from 840p as Berenberg predicted the group’s strong trading will continue throughout 2021.
Meanwhile, builder’s merchant Travis Perkins PLC (LON:TPK) was cut to 1,910p from 2,020p, although the broker still said they expected the shares to re-rate as investors “increasingly appreciate the more attractive remaining business” following its de-merger with Wickes.
Shares in Grafton were down 1.9% at 1,219p in late morning trading, while Howden dropped 2.9% to 786.2p and Travis Perkins fell 1.3% to 1,609p.