Berenberg lowers target price on CareTech
By Iain Gilbert
Date: Thursday 13 Jan 2022
(Sharecast News) - Analysts at Berenberg lowered their target price on care homes operator CareTech Holdings from 700.0p to 660.0p on Thursday, stating both top-line growth and margins appeared to be under pressure.
Berenberg stated that CareTech had reported "slightly weaker-than-expected" 2021 full-year results, due to challenges it currently faces in staffing, with underlying earnings falling 2.2% short of consensus.
The German bank, which stood by its 'buy' rating on the stock, said it expects that fee negotiations with local authorities will be supportive of further increases in staff costs, including the 6.6% increase in the National Living Wage in April 2022.
While margins of the care business will remain challenged in the short term, Berenberg said it still expects further top-line growth, aided by organic additions to the firm's property portfolio, adding to group capacity, as well as the acquisition of Rehavista in November, which it estimates will add roughly £14.0m to revenue.
"We update our forecasts for CareTech following its FY 2021 results, lowering underlying EBITDA by 12.9% across our forecast horizon. Although this screens negatively, we remain confident in CareTech's ability to capture market share and drive growth in its Digital Technology division. We maintain our Buy rating, but lower our price target to 660.0p," said the analysts.
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