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Broker tips: Asos, Eurocell, Polymetal

Fri 03 September 2021 15:01 | A A A

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(Sharecast News) - Analysts at JPMorgan lowered their target price on online clothing retailer Asos from 6,800.0p to 6,680.0p on Friday following its full-year 2021 results preview.

JPMorgan expects Asos, which will report its full-year results on 13 October Across regions, to have traded broadly in line with guidance in July and August and has left its pre-tax profits forecast unchanged at £192.0m, in line with company collated consensus.

However, JPM stated that looking ahead to 2022, it was "mindful of margin pressures" from freight inflation and Brexit, along with the launch of its Litchfield warehouse.

JPM, which stood by its 'overweight' rating on the stock, added that Asos shares had continued to drift following its third-period trading update, partly due to investor expectations of outer year margin cuts.

"Nevertheless, we think visibility of improving trends in markets such as the US is needed to support an improving valuation, albeit we do expect the upcoming results to showcase ongoing positive change in the business including the roll-out of flexible fulfilment and a further strengthened own label proposition," concluded JPM.

Analysts at Canaccord Genuity raised their target price on building supplies retailer Eurocell from 310.0p to 330.0p on Friday, citing recent strong trading and investments made into growth.

Canaccord said Eurocell had delivered "a stellar set of interim results", driven by "a strong market recovery and market share gains", with both of its divisions delivering an "impressive profit outcome" that was "significantly ahead" of 2019 comparatives.

The Canadian bank, which reiterated its 'buy' rating on the stock, highlighted that despite challenges relating to supply-side issues and inflationary pressures, Eurocell managed to do "a very good job" securing raw materials, servicing customers and passing on cost inflation.

Canaccord also pointed out that despite higher capex, including £1.0m for its new warehouse and £2.0m to expand extrusion capacity, the group ended the period with a "modest" net cash balance.

"We increase our underlying 2021E earnings estimates by close to +10% and expect a modest net cash position in 2022E. The strong trading conditions look set to continue into 2022 and the group continues to make good progress investing for growth with new branches, new products, account wins all likely set to support good top-line growth for the foreseeable future, with strong operational leverage as it benefits from recent investment in capacity."

Citi reiterated its 'buy' rating on Polymetal on Friday as it said the investment case is getting back on track.

The bank noted that for more than a decade, Polymetal's stock was driven by consistent delivery on volume growth and low cost position.

"We see both these drivers strengthening once again in the next 6-12 months, after a brief period of flat volume and cost increase," it said.

Citi noted that the lower-cost Nezhda mine is starting in the fourth quarter, while the growth pipeline for the next three to four years is looking stronger than ever.

"Gold production growing to 1.85moz from 1.5moz in 2021 is one of the best growth profiles versus global peers," it said.

"Spot gold price at $1,800/oz+ has turned spot earnings momentum positive once again, while seasonally strong 2H should help deliver stronger earnings and cash flows."

    The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.


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