Berenberg slightly raises target price on Dunelm
By Iain Gilbert
Date: Tuesday 24 Jan 2023
(Sharecast News) - Analysts at Berenberg raised their target price on retailer Dunelm from 1,130.0p to 1,240.0p on Tuesday, stating the group's numbers "increasingly well underpinned".
While cognisant of well-publicised uncertainties affecting the consumer sector, Berenberg said it believes Dunelm's "very strong" second-quarter trading update, with revenue growth of 18% and building momentum as the quarter progressed, leaves FY23 expectations of £178.0m of adjusted pre-tax profits "increasingly well underpinned".
Berenberg also reckons Dunelm is on track to meet its guidance for a gross margin of roughly 50% for the year, stating that while there will be inflationary pressures in its cost base, certain one-off costs in respect of stockholding and new e-commerce and furniture facilities should drop out.
"While we increase our FY23 adjusted PBT forecast only slightly at this stage (to £182.0m, from £178.0m), we believe further upgrades are very plausible," said the analysts.
The German bank thinks Dunelm represents one of the "highest-quality retailers" in its UK coverage and also pointed to a continued market share opportunity arising from its strong omnichannel proposition, a weakening competitive environment, and an ongoing expansion into the furniture category.
"We believe that Dunelm can continue to provide additional shareholder returns, underpinning a total dividend yield of 6.5%. While not our base-case forecast, we believe a special dividend could be declared as early as H1 results on 15 February," concluded Berenberg.
Reporting by Iain Gilbert at Sharecast.com
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