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(Sharecast News) - Deutsche Bank has slashed its target price for plastic piping systems Genuit by nearly 20% amid a "challenging environment" for the plastic piping manufacturer, but said that self-help measures have mitigated downside risk to forecasts.
The bank lowered its target for the shares from 545p to 440p but maintained a 'buy' rating following Genuit's trading update on 22 May.
The company said that a subdued UK housing market and cost inflation driven by the conflict in the Middle East is having an impact on the bottom line, highlighting a lag with its own price increases along with lower volumes.
"Genuit points to a challenging environment, with lower market volumes and significant polymer cost inflation. Assuming a timely stabilisation in macro conditions, management is guiding to FY26 EBIT towards the lower end of the consensus range (c.95m-106m)," said Deutsche Bank analyst Christen Hjorth in a research note.
Hjorth said Deutsche Bank was taking a "slightly more cautious view", cutting its FY26 EBIT forecast by 13% to around 91 and outer year forecasts by a more modest 8%, as Genuit benefits from 4-5m of targeted cost savings.
"Post these moves, Genuit trades on a 2026 P/E ratio of c.12x (historical average: c.14x) and dividend yield of c.5%. Taking a medium-term view, we believe the group is well-placed to outperform its markets and drive margin expansion, supported by exposure to structural drivers, self-help, and M&A," Hjorth said.
Genuit shares were up 0.6% at 259.40p by 1211 BST.
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