Berenberg lowers target price on MJ Gleeson
Analysts at Berenberg lowered their target price on housebuilder from 642.0p to 500.0p on Thursday, stating the company was currently experiencing some "tough times".
Following MJ Gleeson's unscheduled trading update on 3 June, Berenberg cut its earnings per share forecasts for MJ Gleeson by 20% on average over 2025-27.
In its trading update, MJ Gleeson indicated that its FY25 results would now come in below current market expectations, citing a combination of two factors.
Firstly, MJ Gleeson said that the margin performance in its Gleeson Homes division was lower than it had previously expected, as it continued to use selling incentives to drive demand, putting pressure on margins in the process.
Secondly, MJ Gleeson was expecting FY25 profits to benefit from the sale of a land holding, but the transaction did not proceed as it had initially expected.
"We make no change to our revenue forecasts, which reflects no changes to our volume or average selling price assumptions, with all earnings downgrades driven by the reduced margins," said the German bank, which maintained its 'buy' rating on the stock.
"We cut our EBIT, PBT and EPS forecasts by 18%, 20% and 20% respectively over 2025-27, on average. Our new PBT forecast for FY25 of GBP22m implies a decline of 13% yoy, before we expect growth of 13% in FY26. Our FY25 EBIT margin forecast now stands at 6.7%, down from c15% in 2021-22, illustrating the challenges the group has faced on this front."
Reporting by Iain Gilbert at Sharecast.com
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