Equity Analysis /
United Kingdom

GB : Construction - Value more selective after strong run

    Charlie Campbell
    Charlie Campbell

    Analyst - Building Materials, Equipment Hire & Housebuilders

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    Marcus Cole
    Marcus Cole

    Analyst - Building Materials, Equipment Hire & Housebuilders

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    CGS-CIMB
    6 April 2021
    Published byCGS-CIMB

    Housebuilders’ shares have rallied 10% in the last month, but we still find value in the sector. We upgrade our estimates and target prices as we are now more optimistic on house prices, given the improved outlook and strong trading. Three housebuilders upgraded guidance in March, leading to FY21 upgrades of 9% on average, highlighting the improving outlook. Further positive updates at the end of April could benefit the shares as concerns for 2021 continue to unwind. We find value in Persimmon given its sector-leading returns, and the smaller housebuilders, which offer more attractive valuations. We forecast sector earnings to increase by 16% per annum over the next three years, with a dividend yield of 6% in December 2022E.