Broker tips: Sabre Insurance, Hikma, Paragon Banking

(Sharecast News) - RBC Capital Markets downgraded Sabre Insurance on Friday to 'sector perform' from 'outperform' and cut the price target to 135p from 170p as it said it was "waiting for delivery". "The current competitive environment in UK Motor provides a difficult backdrop for Sabre's 'Ambition 2030' plan, announced in December 2024, but which is only starting to roll-out," the bank said.

"In this transfer of coverage note, we make material cuts to EPS forecasts after a disappointing 9month trading update, and a more cautious view of Sabre's competitiveness going forward, given consolidation in the sector and increasing barriers of scale."

The bank said it would rather stay on the sidelines until evidence of market share gains can be seen.

RBC said the target price cut reflects lower EPS and a cut to target multiple from 12x to 10x FY26E EPS, on lowered long-term growth assumption to 1% from 2.5%.

Berenberg cut its price target on Hikma Pharmaceuticals to 2,300p from 2,510p following the company's trading update a day earlier, in which it downgraded medium-term guidance for the injectables unit.

It noted that Hikma maintained its FY25 segmental guidance, but lowered its medium-term core operating profit growth guidance.

Hikma also now expects to be at the lower end of its previously-guided range for three-year group revenue compound annual growth rate, Berenberg said.

"We understand that these changes in medium-term profitability guidance are mainly attributable to a shift in timings for the ramp-up of its manufacturing site in Bedford (due to delays in the supply of machinery), with the site now expected to be operational towards the end of 2027E and with commercial production anticipated from 2028E.

"While disappointing, we think that many of the key drivers for the business remain intact (albeit they have been pushed slightly further out).

"Therefore, we factor the lower end of the medium-term guidance into our forecasts, update our price target and retain our 'buy' rating."

Shore Capital upgraded Paragon Banking to 'buy' from 'hold and lifted the fair value to 1,000p from 975p as it said the recent selloff was overdone.

The broker noted that following the company's "robust" third-quarter trading update at the end of July, it downgraded Paragon to 'hold' as it felt the valuation was up with events.

Since then, the shares have fallen by 16%, despite no material change to consensus forecasts.

"We believe that the most likely cause of this pullback is market concerns around the Chancellor's upcoming Budget announcement and what this could mean for landlords and so buy-to-let mortgage activity," it said.

"Specifically, we note that there has been speculation in the media that rental income could become subject to National Insurance (NI) contributions."

ShoreCap also noted that the challenges facing landlords have increased with the Renters Rights Act 2025 receiving Royal Assent on 27 October, meaning it has now been passed into law.

"Amongst other things, the Act makes it more difficult for landlords to remove tenants, puts greater restrictions on rental increases and raises the bar on property standards.

"While this is good news for tenants, it arguably reduces the attractions for landlords."

Overall, however, the broker said it thinks the market may be overly cautious about the prospects for Paragon, noting that its "highly experienced" management team is well versed in navigating the uncertainties of the UK buy to let market.

"As such, the recent sell off appears overdone to us and, with the stock trading on an FY26F P/TNAV of just 1.1x, PER of less than 7x and with a dividend yield of circa 6%, its valuation credentials once again appear attractive."