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.
Equity Analysis /United Kingdom
GB : Construction - Value more selective after strong run
6 April 2021