Source: Sharecast
RBC Capital stated that when it had upgraded Berkeley from 'underperform' shortly ahead of the firm's strategic update on 1 April, it had "very quickly looked like the April fool" as it realised it had the wrong rating. "But our mistake was not being too bold, but not being bold enough," it said.
The Canadian bank stated that Berkeley may well hope that market conditions improve, but highlighted that it was planning for them to get worse. "And it is easier to speed things up when markets improve than to slow them down as market conditions worsen," said RBC.
"We upgrade to 'outperform' because we believe that following the estimate reset and share price falls the value proposition is compelling and in our view Berkeley Group is the best placed housebuilder to manage the current worsening market conditions," said RBC Capital, which slightly lowered its target price on the stock from 3,900p to 3,850p.
RBC made no changes to its FY26 estimates, but cut its volumes by 8% in FY27 from 3,820 to 3,500 and by 21% from 4,000 to 3,150 in FY28E. It also modelled 5% build cost inflation in FY27, and then a reduction due to ongoing optimisation strategies and self-help. Overall, its pre-tax profit estimates were unchanged for FY26, but fall by 14% and 32% in FY27 and FY28, respectively.
Reporting by Iain Gilbert at Sharecast.com