RBC Capital Markets lowers target price on Barratt Redrow

(Sharecast News) - Analysts at RBC Capital Markets lowered their target price on property developer Barratt Redrow from 450p to 425p on Thursday as it updated its estimates to account for the firm's interim results.

RBC Capital said Barratt's mid-year change of accounting policy "raised a few eyebrows", but stated recent talk in the press about a return of 'Help to Buy' seemed "more interesting to investors" than whether or not imputed interest on building safety provisions were accounted for, especially as Barratt commented that "the key to a sustained recovery in the housing market and volume increases across the sector" was government support for prospective homebuyers.

The Canadian bank that said without government support, Barratt faces the challenges of working through sites more slowly and with lower margins than it would like, knowing that "self-help can only take it so far".

"We have updated our estimates to reflect Barratt's H126 numbers, and to predominantly account for i) higher build cost inflation, reducing gross margins, ii) the imputed interest accounting change, and iii) higher interest costs," said RBC, which has a 'sector perform' rating on the stock.

"Our PBT FY26 estimate is 2.1% lower than our prior estimate onan adjusted basis (pre PPA), though 7.2% lower on a reported basis. Our price target is c.5.5% lower, from 450p to 425p, driven by our reduced TBV estimates."

Reporting by Iain Gilbert at Sharecast.com