Broker tips: Unilever, Integrafin
By Iain Gilbert
Date: Thursday 23 May 2024
(Sharecast News) - JPMorgan Cazenove double-upgraded Unilever on Thursday to 'overweight' from 'underweight' and hiked its price target on the stock to 5,100.0p from 3,600.0p after several years of caution on the equity story.
"Against our February 22 blueprint, changes over the past 12 months have soothed our concerns as the company is addressing; 1) cultural change and corporate governance, 2) market share underperformance through increased investments and execution focus, 3) portfolio transformation with disposals," the bank said. "While these changes should impact over time, our analysis of volume levels shed light on volumes recovery from 2019 base in Europe/Nutrition/ Ice cream while our worries of price rollover have not materialised."
JPM said this feeds a stronger FY24 both in quantum - it is around 3% ahead of FY24 consensus earnings per share - and in quality.
"This should give credence Unilever is on the path to turnaround and contribute to the stock re-rating along with positive earnings revision."
JPM lifted its 24/25 EPS estimates by 2.5%/6% and placed the shares on 'positive catalyst watch' on the back of strong second-quarter like-for-like sales and first-half margins.
Analysts at Berenberg raised their target price on Integrafin shares from 360.0p to 390.0p on Thursday following the group's interim results a day earlier.
Berenberg said Integrafin's H124 report detailed a "solid" performance, with results coming in ahead of consensus pre-tax profit expectations, primarily due to higher-than-expected interest income and lower-than-expected costs.
The German bank highlighted that the investment platform sector was characterised by long-term growth trends and noted that UK platform assets had grown at a roughly 11% compound annual growth rate between 2012 and 2023.
Berenberg, which reiterated its 'buy' rating on the stock, also noted that Integrafin has also steadily taken market share and that it believes the business should be able to deliver consistent earnings growth in the future.
"Given their attractive growth and margin characteristics, pureplay investment platforms typically trade at high valuation multiples. Integrafin is no exception to this and traded at an average of c30x P/E up until 2022. However, over the past couple of years, platforms have de-rated, with cost-of-living pressures a headwind to growth in the sector," said Berenberg.
"We believe that the current price (Integrafin trades on c22x forward EPS) offers a good opportunity to buy into a business that should be able to generate consistent earnings growth and potentially also re-rate as market sentiment improves."
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