Broker tips: IHG, National Grid, Greggs
By Iain Gilbert
Date: Wednesday 28 May 2025
(Sharecast News) - Analysts at Berenberg lowered their target price on Holiday Inn owner Intercontinental Hotels Group from 9,700.0p to 9,200.0p on Wednesday but said the company's fundamentals remain "solid" despite a softer outlook.
Berenberg noted that IHG's shares have fallen 15% year-to-date, principally due to concerns regarding hotel markets in the US and China - the two most important markets for IHG.
However, Berenberg said IHG's Q1 results "showed resilience", while the company's commentary on current trading and the confirmation that it remains "on track to meet consensus expectations" was seen as "encouraging".
"Although we are reducing our estimates - primarily due to our falling revenue per available room (RevPAR) estimate for the Americas division - the resilience of the business model can be seen with our estimates only falling by a low-single-digit amount," said Berenberg, which reiterated its 'hold' rating on the stock.
"We value IHG using a DCF model, which yields a value per share of 9,200p. On multiples, IHG trades on a P/E of 23.3x our FY25 EPS estimates."
RBC Capital Markets downgraded National Grid on Wednesday to 'sector perform' from 'outperform' as it said that despite a strong investment proposition, it sees more limited upside at the current share price.
RBC said National Grid retains an attractive mix of growth and yield, with a guided circa 10% asset growth compound annual growth rate for FY25-29 well underpinned by strong visibility in the regulated business and a 6-8% EPS CAGR for FY25-29, which may be conservative following the finalisation of RIIO-T3.
"However, we believe that much of this strong performance is acknowledged and incorporated into the current share price," it said, adding that it does not see an imminent catalyst with any revision in the EPS profile unlikely prior to FY26 year-end.
The Canadian bank said it was updating for FY25 results with a revised price target of 1,175p, up from 1,150p, and said it continues to see National Grid as a strong compounder in the space and believes the business will deliver on its current £60bn capex plan FY25-29.
"However, we struggle for upside at the current share price given an implied circa 35% premium to FY26E RAB in the UK business, whilst our valuation of the US business sits at circa 17x FY26E price-to-earnings."
Shore Capital downgraded Greggs on Wednesday to 'hold' from 'buy' saying that as investment reaches its peak, it sees little to stimulate the shares.
The broker said it still sees Greggs as a very high-quality business with an excellent management team and a value/quality proposition that continues to positively stand out in the UK food-to-go market.
"We also believe that growth opportunities do exist and that the group could be a materially bigger business on a five-year view albeit the 'peak' Greggs question is likely to be revisited periodically."
That said, Shore expects the financial performance to be more subdued than in recent years and versus what it anticipated at the time of the upgrade.
"We see the shares being dull for a couple of years, with limited catalysts to drive material upside," it said. "We concede we went too early in January in turning positive and downgrade our recommendation to hold."
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