FTSE 250 movers: Marshalls up, Pets at Home down on Berenberg notes

(Sharecast News) - FTSE 250 (MCX) 19,246.31 -0.58% Berenberg upgraded Marshalls on Thursday to 'buy' from 'hold' and lifted the price target to 420p from 320p.

The bank noted that Marshalls has had a pretty "torrid" time since it announced the largest acquisition in its history, Marley, in April 2022.

"End-markets turned against the company and much of its product range proved to be far more discretionary than many investors and analysts had expected. As volumes fell, negative operational gearing kicked in, and the earnings sensitivity was material," it said.

"However, Marshalls also presents arguably one of the more interesting rebuild stories in the sector, particularly in light of the new CEO, Matt Pullen, joining at the start of 2024."

Berenberg said that as with most cyclical stocks, it thinks the Marshalls share price is likely to move quickly at the start of a new cycle before earnings momentum really kicks in.

"So what does the size and shape of the next cycle look like? We run a number of scenarios and conclude that there is interesting upside in the stock on a multi-year view, particularly given the magnitude of weakness over 2022-23."

Shares in Pets at Home were under selling pressure on Thursday after analysts at Berenberg cut their rating on the stock from 'buy' to 'hold' and slashed their target price by nearly 10%.

In a research note covering consumer-focused sectors, the broker said noted an improving outlook for consumer confidence, but said it has a preference for companies exposed to the food industry in the first half of 2023 "given more resilient end-market trends, market structure and pricing power".

As such, food manufacturer Cranswick is Berenberg's top key pick as it should "continue its run of strong trading momentum and benefit from the high customer concentration of outperforming large grocer names (primarily Sainsbury's and Tesco)". Cranswick is rated 'buy' and its target price has been raised from 4,694p to 4,921p.

Homeware chain Dunelm is also rated 'buy' due to current "conservative" market forecasts for revenue with the broker seeing upside in the aftermath of management's investment in pricing to deliver expanded market share. The target price for Dunelm was lifted from 1,370p to 1,410p.

As for Pets at Home, whose target price was trimmed from 440p to 390p, Berenberg downgraded the stock due to significant cost headwinds and downside risk to near-term like-for-like retail revenue targets.

"We are of the view that Pets at Home's success in 2024 will be determined more by its ability to manage costs than to drive top-line growth. Management will need to tame significant cost headwinds in FY 2025E to avoid further downgrades to consensus forecasts," the broker said.

Paragon Bank fell after trading without entitlement to a dividend.

Market Movers

FTSE 250 - Risers

Marshalls (MSLH) 296.80p 5.77% Rotork (ROR) 321.20p 2.49% Serco Group (SRP) 177.40p 2.25% Cranswick (CWK) 4,110.00p 2.14% WH Smith (SMWH) 1,236.00p 2.06% RHI Magnesita N.V. (DI) (RHIM) 3,426.00p 1.84% Morgan Sindall Group (MGNS) 2,305.00p 1.77% Renishaw (RSW) 3,560.00p 1.60% AJ Bell (AJB) 321.40p 1.58% Hill and Smith (HILS) 1,900.00p 1.39%

FTSE 250 - Fallers

Paragon Banking Group (PAG) 658.00p -6.53% Bytes Technology Group (BYIT) 615.50p -6.25% Pets at Home Group (PETS) 265.60p -5.21% Dr. Martens (DOCS) 85.60p -3.93% Tritax Eurobox (GBP) (EBOX) 49.80p -3.86% Trustpilot Group (TRST) 172.90p -3.78% Helios Towers (HTWS) 76.60p -3.16% Supermarket Income Reit (SUPR) 78.50p -3.09% IntegraFin Holding (IHP) 286.80p -2.91% Virgin Money UK (VMUK) 152.35p -2.87%