Deutsche Bank upgrades Superdry, says de-rating overdone
Superdry's de-rating is overdone and the valuation is now attractive, Deutsche Bank on Wednesday as it upgraded the clothing brand to 'buy' from 'hold' and lifted the price target to 1,610 from 1,430p.
FTSE 250
19,601.98
17:09 25/04/24
FTSE 350
4,434.34
17:09 25/04/24
FTSE All-Share
4,387.94
16:49 25/04/24
Personal Goods
15,870.16
17:09 25/04/24
Superdry
7.72p
16:35 25/04/24
The bank said that like the company's pricing policy, its share price now reflects value for money after concerns around its store like-for-like performance and its brand health sparked a de-rating of over seven price-to-earnings points since January.
DB noted that at the start of the year, Superdry shares were at all time highs and its price-to-earnings was trading near two-year highs. Since then, the stock has lost 35% of its market cap, it trades near five-year PE lows and at a significant discount to the UK general retail sector.
"At 12.2x calendar 18 earnings, it trades in line with Next and M&S. However, with double-digit profit growth forecast as well as a long term global opportunities, Superdry's investment thesis is far more exciting.
"We believe now is an attractive entry point into a story with self-help opportunities, margin expansion potential and strong cash generation."
In addition, Deutsche said Superdry's cash return outlook has also improved and it sees scope for special dividend payouts in FY19 and FY20 driven by strict capex criteria and working capital improvements.
Earlier this month, Superdry announced a special dividend as it reported a rise of more than 11% in annual profit.
Underlying pre-tax profit for the year to 28 April jumped 11.5% to £97m, in line with expectations, as revenue increased 16% to £872m. Statutory pre-tax profit fell 23% to £65.3m because of fair value movement on forward exchange contracts and a write-down on the value of a Berlin store.
At 1030 BST, the shares were up 1.4% to 1,363p.