Broker tips: B&M, Ceres
By Iain Gilbert
Date: Tuesday 25 Feb 2025
(Sharecast News) - Analysts at Canaccord Genuity lowered their target price on discount retailer B&M from 545.0p to 495.0p on Tuesday following the surprise announcement of chief executive Alex Russo's departure and a further moderation to FY25 guidance.
Canaccord Genuity pointed out that Russo's departure follows the news announced in November that B&M's trading director was also set to depart in March, highlighting "significant changes" to the group's senior leadership team.
"The appointment of a new CEO will be an important catalyst and driver of sentiment in the shares," said the Canadian bank, which stood by its 'buy' rating on the stock. "Whilst further guidance reductions are disappointing, and the leadership changes unsettling, we continue to believe that the group's long-term growth opportunity remains intact.
On Canaccord's revised forecasts, B&M trades on an FY25E price-to-earnings ratio of 8.6x, something it continues to believe offers "good value", both in the context of the long-term average FY1 PER multiple of roughly 15x, but also given the "significant long-term expansion potential" both in the UK and Europe.
Shares in Ceres Power have plummeted over the past week after Bosch ended a partnership with the firm and intends to sell its stake, though Berenberg said it still sees significant value to the stock despite the "setback".
Bosch announced on 20 February that it will discontinue its operations relating to the industrialisation and preparation for production of decentralised power-supply systems based on solid oxide fuel cells, thus ending its partnership with Ceres. As a result, the company also decided to divest its 17.44% shareholding in the company.
Berenberg slashed its target price for Ceres from 650.0p to just 340.0p, but that still represents huge upside from Tuesday afternoon's price of 70.95p, with the shares having nearly halved since the news.
"While this was clearly a disappointing update for Ceres and it may take time to restore market confidence, we note that in the near term this has limited impact on our financial forecasts and, importantly, over the last 12-18 months, the company has signed partnerships with other global manufacturing partners that will help scale the technology over the long term," the broker said.
Nevertheless, looking further out, Berenberg still cut its 2025-2030 revenue forecasts by a cumulative £150.0m or 25%.
"Overall, while the loss of Bosch is clearly frustrating, we remain confident in the ability of Ceres's partners to scale-up the technology and generate significant long-term, high-margin royalty revenue," the broker said, keeping a 'buy' rating on the stock.
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