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Broker tips: Ryanair, Dunelm
(Sharecast News) - Analysts at Deutsche Bank slightly raised their target price on low-cost carrier Ryanair from €15.3o to €15.50 per share on Tuesday following the group's first-quarter results. Deutsche Bank said its revised target price offered roughly 20% upside to the shares, with Ryanair remaining its only 'buy' rated European airline.
The German bank also increased its second-quarter fare estimates to 9% above pre-crisis levels given Ryanair's disclosure that, on average, it was currently tracking ahead of pre-Covid levels by "a low double-digit percentage".
However, at the same time, DB said it had taken "a more cautious view" on second-half fares, with its analysts now assuming a 4% drop versus pre-Covid, down from the 2% drop it had pencilled-in before, and also updated its fuel and foreign exchange assumptions.
"The result is a 13% increase in our FY23 PAT forecast from €807.0m to €909.0m (compares to Bloomberg consensus at €1.12bn)," said DB.
Analysts at Berenberg lowered their target price on retailer Dunelm from 1,200.0p to 1,130.0p on Tuesday but said the group's "resilience" remained underappreciated.
Berenberg said the contrast between Dunelm's fourth-quarter trading update on 21 July and Made.com's from two days earlier was "stark", with Dunelm's full-year pre-tax profits now expected to surpass consensus estimates amid "solid" trading.
The German bank stated investors were now heavily focused on 2023 but said Dunelm's flexible business model was underappreciated by the market.
"Growth should be sheltered by market share gains, with the company's well invested omnichannel proposition providing a competitive advantage over peers," said the analysts, who also reiterated their 'buy' rating on the stock.
Berenberg also highlighted that Dunelm's strong return-on-invested-capital profile and cash generative business should support additional capital returns.
"Dunelm trades on 11.7x FY23E P/E and 10.6x EV/EBIT, despite a very strong balance sheet position, a c7% dividend yield, and c30% lease-adjusted ROIC. We value Dunelm on 16x P/E, broadly in line with its 10-year pre-Covid-19 average multiple, which should be underpinned by its strong ROIC and de-levered balance sheet," concluded Berenberg.
Reporting by Iain Gilbert at Sharecast.com
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