Premier Inn owner Whitbread PLC (LSE:WTB) is “in a strong position to increase its long-term rooms” according to analysts at Liberum Capital, who reiterated an ‘add’ recommendation on the stock following the firm's interim results.
Whitbread reported that it swung to a profit in the first half of its financial year 2023, with earnings 40% ahead of pre-pandemic levels.
The Liberum analysts said that the decline in independent hotels in the UK means the FTSE 100-listed company has the potential to increase its long-term room numbers to 125,000 from 110,000.
Additionally, they noted that the German market has “rebounded strongly” since restrictions were relaxed in April, meaning its loss guidance improved by £10mln.
The Liberum analysts said they see potential for material upgrades despite higher energy and other costs which are expected to be £60mln in the second half. They maintained a target price for Whitbread shares of 2,850p.
A similar view was provided by analysts at Shore Capital, who said that despite higher costs they were encouraged by Whitbread's strong interim results, and reiterated a 'buy' rating on the stock.
They noted that the £60mln drag in costs Whitbread forecasts for the second half reflects underlying inflation and further investment in IT and marketing.
However, this will be partially offset by roughly £25mln additional interest charge benefit from increases in deposit rates, the ShoreCap analysts concluded.
In afternoon trading, Whitbread shares were 0.6% higher at 2,626p.