FTSE 250 movers: HSBC mass upgrade a boost for housebuilders

(Sharecast News) - FTSE 250: 19,036.05 +0.18% at 1319 GMT.

Shares in housebuilders were in focus on Thursday after HSBC upgraded its stance on a host of stocks, arguing that a downturn in the housing market and tepid recovery in return on invested capital are more than priced in to the shares.

The bank upgraded Barratt, Bellway, Crest Nicholson, Persimmon, Redrow and Taylor Wimpey to 'buy' from 'hold'. Their target prices were lifted to 570p from 390p, to 2,700p from 2,030p, to 270p from 230p, to 1,550p from 1,410p, to 670p from 500p, and to 150p from 105p, respectively.

HSBC upgraded Berkeley to 'hold' from 'reduce' and the target price to 4,000p from 3,000p. Finally, it reiterated its 'buy' rating on Vistry and hiked the price target to 1,060p from 900p.

"We now have greater visibility about the shape of the current housing market downturn for the housebuilders' profits and cash flows and their recovery from it, which we believe to be more than priced-in to share prices," HSBC said.

HSBC said its preferred picks, with more than 30% implied average upside, out of its seven buy-rated stocks are partnerships play Vistry, Redrow and national volume builder Taylor Wimpey, all of which trade at large discounts.

"Dividend yields are attractive across the sector, averaging 5.4% to 8.1% in 2023-27e, whilst we see material additional surplus capital potential for Redrow and Persimmon, assuming no year-end indebtedness including land creditors," it said.

The news boosted landscape supplier Marshalls and building merchant Travis Perkins.

Imperial Leather maker PZ Cussons backed its full-year expectations on Thursday as it posted a rise in third-quarter revenues as price increases underpinned margins.

In the quarter to 4 March, like-for-like revenues grew 6.2% to £166m, marking the sixth consecutive quarter of revenue growth. Cussons said this was driven mainly by price/mix improvements.

Cussons said Europe & the Americas were back to strong revenue growth, up 9.9% on a LFL basis to £49.3m, and with "significantly improved" margin. It hailed "particularly strong" performances from St. Tropez US and the combined Imperial Leather and Cussons Creations portfolio.

Meanwhile, Asia Pacific LFL revenues grew 1% to £47.6m, driven by strong growth in Australia.

Africa saw a 7.7% jump in LFL revenues to £68.4m. Cussons said strong trading in December and January was partly offset by disrupted demand in Nigeria in February due to bank note changes and the elections.

Cussons said it expects FY23 adjusted pre-tax profit to be "at least in line" with current market estimates of £68.1m.

Chief executive Jonathan Myers said: "We have delivered another quarter of mid-single digit revenue growth, in line with our longer-term ambition. This represents a sixth consecutive quarter of growth, with the business underpinned by the strength and depth of our portfolio and our ongoing strategy to invest behind our brands, build internal capabilities and serve consumers better.

"As anticipated, performance has strengthened in Europe & the Americas, with a return to revenue growth and a marked improvement in profitability in the quarter. As a result, we remain confident in delivering against FY23 expectations and that further strategic progress will be made in the balance of FY23 and into FY24."