Broker tips: Michelmersh, Taylor Wimpey, British American Tobacco
By Iain Gilbert
Date: Tuesday 02 Sep 2025
(Sharecast News) - Analysts at Berenberg lowered their target price on brick maker Michelmersh from 170p to 150p on Tuesday after the group published its H125 results earlier in the morning.
Michelmersh stated that overall, trading has continued to be "broadly resilient" amid a tough market backdrop, although certain factors have weighed on progress, leaving management to now guide FY25 performance to be in line with FY24.
Berenberg said the key points from Michelmersh's statement were that overall UK despatch volumes have shown some recovery in the period, that pricing, production delays at the Carlton plant and a tough Belgian market had weighed, and that the period ended with £1.5m net cash, continuing to leave the business with a strong balance sheet.
The German bank, which has a 'buy' rating on the stock, updated its numbers post-results and noted a 13-16% reduction in adjusted underlying earnings across the forecast period, moving the price target down.
However, Berenberg said the stock continues to provide operationally geared exposure to a recovery in building material volumes.
RBC Capital Markets downgraded British American Tobacco on Tuesday to 'underperform' from 'sector perform' but lifted its price target on the stock to 3,400p from 3,000p as it said profit expectations for the company's New Categories were "seriously overblown".
"Our view of the trajectory of BAT's profits and cash flow hasn't changed very much, but given the share price's phenomenal performance, we feel that it is incumbent on us to revisit our assumptions about the drag on profitability we expect from a growing but low margin New Category business," RBC said. "What we haven't done before is try to dig into the Heated Tobacco, Vapour and Modern Oral markets in any depth, nor compare the relative composition and profitability of BAT and PMI's businesses.
The Canadian bank said it recognised that, in part, BAT's outperformance has been a function of sector rotation, not to mention other consumer staples stalwarts failing to perform in the defensive and predictable manner that has long been a large part of the sector's investment case, in its view.
"But we also think that expectations for the transformational nature of BAT's New Category business have lost touch with the reality of a business that lacks scale in the most profitable New Category (Heated Tobacco) and is most heavily exposed to the competitive battlefield that is Vapour," said RBC.
The Canadian bank said that being so, its expectations for the potential of BAT's profits and cash flow were relatively muted, hence the downgrade. RBC said it was being a little more generous in its sales forecasts over the next couple of years, with organic revenue growth 2.2% in 2026E and 1.9% in 2027E.
Bank of America downgraded Taylor Wimpey to 'neutral' from 'buy' on Tuesday and cut its price target on the stock by 13% to 105p, pointing to near-term headwinds.
"We still like their quality land bank, high presence among first time buyers and we believe the mid-term growth story is intact driven by a lower rate/planning reform," said Bank of America. "However, we see some headwinds in the near term for this name: a slower-than-peers' progress in outlet opening, a softening 2Q market condition, fire safety issue only to be fixed by 2030, dividend payment is not comfortably covered, and consensus on FY26 margin expansion is optimistic, in our view."
Bank of America said Taylor Wimpey's 2026E multiple was at circa 0.8x P/B and 11x P/E. While this was low, it was also largely in line with what the one-year forward return on equity was implying at 0.9x and 11.8x, respectively, BoA said.
Reporting by Iain Gilbert at Sharecast.com
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