Halfords can step up a gear but Pets at Home growth due for cat nap, says RBC

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Bikes and pets have undeniably been among the ‘pandemic winners’, so it’s no surprise that analysts at RBC Capital Markets have initiated coverage of retail pair Halfords Group PLC (LON:HFD) and Pets and Home PLC LON:PETS).

Halfords was given an ‘outperform’ rating and 450p price target to start, compared to the previous close of 389.2p.

A leader in the UK motoring and cycling retail and services markets, the analysts also noted that the FTSE 250-listed group also has exposure to the more fragmented but growing autocentres market.

“We see opportunity for market share gains from its growing Autoservices business and expect that its more integrated strategy should help to sustain some of the topline gains it has seen over the course of the pandemic.”

Pets at Home only received a ‘sector perform’ rating and a 450p price target, versus the last close of 443.4p, with the analysts noting that the shares have had a strong run over the last year and so the valuation prevented a more positive rating.

The retailer is the UK’s leading specialist pet care business, with around a 23% share of the UK pet care market.

“Whilst we think that PETS is a well run company with a pragmatic and achievable strategy, we think growth rates will likely moderate going forward,” was RBC’s take.

However, for a way for investors to play the ‘rise of the pets’ theme, RBC suggested veterinary group CVS Group PLC (LON:CVSG), where it already had an ‘outperform’ rating.

“The strong veterinary market is complementing CVS’ self-help strategy, with accelerating revenue growth being delivered, and we believe that 2022 earnings will beat consensus by more than 10% organically.

“Its strong balance sheet enables further M&A, which we expect will drive upside to even our forecasts.”

Its price target for CVS is 2,750p, compared to the previous close of  2,185p. 

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