On Monday, Citi updated its stance on Bellway Plc (LON:BWY:LN) shares, a notable UK homebuilder, by raising the price target to GBP31.51 from the previous GBP30.33. The firm continues to endorse a Buy rating for the company's stock.
This adjustment follows Bellway's fiscal year trading update, which indicated a steady performance and the company's ability to meet its projected completions of 7,500 units for the financial year 2024.
The anticipated average selling price (ASP) is now slightly higher at around GBP305,000, influenced by the product mix, compared to the earlier guidance of approximately GBP295,000.
The trading report for the period starting February 1 until June 2 showed promising results, with a private sales rate of 0.62, or 0.61 when excluding bulk sales. This figure surpasses Citi's estimate of 0.59 and suggests a relatively strong demand environment despite challenges in affordability.
Notably, the cancellation rates remained low at 11%. The firm pricing environment has been maintained with selective use of incentives and controlled cost inflation on new tenders.
Bellway's performance is further bolstered by an encouraging outlook for growth from the financial year 2025 onward. The company is optimistic about an improved planning landscape following recent elections. The update also highlighted a targeted reduction in underlying operating margin by at least 600 basis points, aligning with expectations.
Citi's revised price target reflects confidence in Bellway's ability to navigate current market conditions and capitalize on growth opportunities in the coming years. The company's strategic approach to pricing, cost management, and planning for future expansion has been recognized as key factors contributing to its positive outlook.
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