Berenberg lowers target price on B&M

(Sharecast News) - Analysts at Berenberg lowered their target price on discount retailer B&M from 630.0p to 590.0p on Monday as it noted a number of near-term catalysts lay ahead. Berenberg noted that B&M's share price has dropped roughly 55% since late 2023, with shares now at their early Covid-19 levels, despite consensus FY25 revenues and underlying earnings being 48% and 80% higher than pre-pandemic levels, respectively. It also noted B&M's shares have de-rated from a price-to-earnings ratio of around 15x to c8x.

The German bank, which has a 'buy' rating on the stock, said its new forecasts, with EBITDA reduced by 3-4% over FY25-27, reflect B&M's latest, slightly lowered, guidance. However, it pointed out that this still points to flat profit year-on-year, and free cash flow of over £300.0m per year - double the pre-Covid average - offering an 11% FCF yield and supporting a 10% total dividend yield.

"We expect share buybacks to be introduced in FY 2026E, driving double-digit-percentage EPS growth on a three-year view. Our DCF requires a long-term sales decline of circa 15% per year to derive the current share price, which makes no sense to us," said Berenberg.

As for future catalysts, Berenberg stated it expects B&M UK like-for-like sales in Q126 to inflect back into growth, helped by easier prior-year comparative periods, as well as some improvement in UK consumer demand, and the current run of favourable weather to be good for its gardening and outdoor categories.

"We expect B&M's market-leading value offer, as well as moderate price inflation across the sector, to continue to drive solid trading through FY26E. News on the group's new CEO hire (expected sooner rather than later) should also help to drive further interest in the shares. We see B&M facing minimal impacts from the latest tariff announcements," concluded Berenberg.

Reporting by Iain Gilbert at Sharescast.com