A positive AGM update from CVS this morning, illustrating a continuation of solid trading momentum since the Sept finals. LFL sales in the first four months were ahead by 5.1% vs a stiff 8% comp. This implies an acceleration to 6.3% over Sep-Oct - an excellent showing, reflecting resilience and ongoing self-help to optimise revenue generation. Significantly, this flows through to a healthy EBITDA margin back above 15%. Trading during the current lockdown has not been much impacted and this bodes well for any future restrictions. The balance sheet has further deleveraged. With guidance remaining suspended we hold off reinstating forecasts, but on our illustrative analysis the shares are trading on an FY21/FY22 EV/EBITDA rating of 14x/13x and a P/E of 22x/21x. Given the structural tailwind, underlying momentum and sector M&A at >15x EV/EBITDA, we see scope for rating expansion.
