Canaccord lowers price target on Eurocell after heightened costs offset sales growth
EUROCELL
£1.34
09:59 26/04/24
Canaccord Genuity lowered its target price on UPVC supplier Eurocell on Wednesday after higher manufacturing and distribution costs offset its "solid double-digit" sales growth seen in the second half of the year.
The Canadian broker said Eurocell's strong sales growth, combined with sales mix changes, were what in fact lay behind its higher manufacturing and distribution costs, as the company struggled to keep up with such growth in the near-term.
As a result, Canaccord cut its EBITDA estimates for between 2018-2020 by around 6% to £30.7m but did acknowledge that management had since addressed the temporary manufacturing issues through extra investment, capacity increases and hiring more labour.
"Management continues to make good progress with its strategic initiatives with recycling benefiting from the Ecoplas integration."
Looking forward, Canaccord cut its price target from 275p to 260p on its lower estimates and retained its 'buy' rating due to it continuing to see "attractive medium-term value.
"The shares have held up relatively well year to date and we would not be surprised to see them edge lower and pause in the near term."