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02 Nov 2021
Q321 postview (+15 questions for management)
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Q321 postview (+15 questions for management)
Travis Perkins plc (TPK:LON) | 728 -9.5 (-0.2%) | Mkt Cap: 1,547m
- Published:
02 Nov 2021 -
Author:
Bromehead Yves YB | Roger Paul PR -
Pages:
9
Summary of Q321 results
Travis Perkins Q321 l-f-l sales increased by +13% YoY, missing our forecasts of +17%, albeit it was still a very solid quarter considering normalising DIY trends, tougher comparatives, supply-chain disruption, logistic bottlenecks, labour scarcity issues, and other external factors such as the ''pingdemic'', the summer holiday cool-off effect and the fuel crisis.
Key news
Despite a slightly weaker than anticipated Q321 sales performance, management increased its FY21 trading profit guidance by +7% to GBP300m (Excluding GBP40m of property profits). This is mainly driven by the benefit inflation has on stock revaluation and therefore distributor margins. Looking forward, the group expects some near-term normalisation, including in Toolstation as the group faces tougher comparatives near-term. Having said that, group margins are likely to surprise positively as inflation is expected to increase further into the start of 2022.
Earnings
We increase our FY21/22 EPS by +5% after integrating a more positive margin scenario near-term and into 2022.
Rating and target price
We reiterate our Outperform recommendation and increase our target price to GBp2,050/share, leaving more than 30% upside vs. current share price.
Investment case
A successful turnaround story with attractive FCF generation and a capital return focused mind-set.