Howden Joinery PLC (LON:HWDN) is “cooking with gas” and is expected to benefit from an “increasingly positive kitchen market in the near term”, according to analysts at Credit Suisse.
In a note on Monday, the investment bank initiated coverage on the stock with an ‘outperform’ rating and 900p target price, saying that in the longer term they expected the kitchen and building products supplier to “continue to take [market] share, supported by its simple and differentiated business model”.
READ: Howden Joinery posts much improved revenues UK thanks to increases in prices and volume growth
“While we see upside to earnings estimates across our repair, maintenance and improvement (RMI) exposed coverage, we find Howden particularly attractive. We expect the current strength of the housing market to drive strong demand for the balance of 2021, where we believe consensus is likely to prove overly conservative”, Credit Suisse said.
“While the UK kitchen market has seen minimal long-term volume growth, Howden has more than doubled its market share since the early 2000s (to c.38% by volume). While we are conscious that it is close to reaching its self-imposed 850 depot cap, we expect continued UK revenue growth beyond our forecast period, driven by newer branches maturing and [like-for-like] gains, which should in turn drive operating leverage. In combination with a reversal of recent gross margin pressure, we see scope for meaningful medium-term margin expansion”, the bank added.
Shares in Howden rose 0.6% to 786p in mid-morning trading.