Broker tips: Intertek, Moonpig

(Sharecast News) - HSBC downgraded its recommendation on shares of inspection, product testing and certification group Intertek on Friday, slashing the price target to 5,700.0p from 6,500.0p. "Whilst Intertek's medium-term prospects are attractive, we think that H2 demand for Trade division might be negatively impacted by higher petrochemical prices, and we downgrade Intertek to 'hold' (from 'buy').

"We think the risk-reward balance for Intertek is less attractive compared to other opportunities in the sector."

In a note on the wider sector, the bank said the market considers testers as defensive and lower risk than the broader industrial space.

However, HSBC thinks market expectations of faster growth are consistent with changing exposure and lack of headwinds.

"The inflationary market could even drive better organic growth and drop-through margin than currently expected owing to pricing power in supply chains," said HSBC.

"Whilst testers have experienced multiple contraction in anticipation of rate hikes, estimates for profit growth still do not reflect benefits of higher inflation."

HSBC added that scenario analysis suggested the TIC names could have "modestly lower downside" in a recessionary scenario than other industrial names under its coverage.

Analysts at Berenberg lowered their target price on greeting cards and gifts retailer Moonpig from 390.0p to 420.0p on Friday despite saying "another encouraging update" from the firm being overlooked by the market.

Berenberg noted that Moonpig shares were now down roughly 44% year-to-date and approximately 12% since the company's trading update on Tuesday, in which it upgraded full-year sales guidance and reiterated expectations for the 2023 trading year.

However, with margins coming under pressure across its consumer coverage amid mounting cost-inflation concerns, Berenberg believes that Moonpig's resilience has been "overlooked".

"With the company now trading on c15x April 2024 P/E, or a c8% FCF yield, we reiterate our 'buy' rating," said Berenberg.

The German bank also highlighted that in its update, Moonpig upgraded its full-year sales guidance by circa 5% following "an unexpectedly strong" December/January performance as the Covid-19 Omicron variant restricted mobility in both the UK and the Netherlands.

"Although the company is maintaining its existing FY23 guidance, recognising that this FY22 uplift was Covid-19- driven rather than underlying, we believe that there are some broader positives to consider," said Berenberg.