Deutsche Bank has adjusted its outlook on Vistry Group PLC (VTY: LN), reducing the price target to £11.80 from the previous £15.13, while continuing to recommend the stock as a Buy.
The revision follows Vistry's trading update, which revealed an underestimation in build cost assumptions for nine schemes within its Southern division. This miscalculation has led to a projected cumulative profit before tax (PBT) reduction of £115 million for the fiscal years 2024 to 2026.
The bank has consequently lowered its PBT forecasts for Vistry for the years 2024, 2025, and 2026 by 19%, 6%, and 1%, respectively. Vistry's management has asserted that the cost issues are isolated to the Southern division and has reaffirmed their medium-term targets, which include £800 million in EBIT and £1 billion in shareholder distributions.
Despite the reduction in the price target, Deutsche Bank's analyst highlighted that if the cost overruns are an isolated issue, Vistry's shares could potentially recover significantly. The firm's stance remains positive, with the belief that the stock holds the potential for a strong rebound.
Nonetheless, the analyst also cautioned that if further problems emerge beyond the Southern division, there may be additional risks to the stock's value.
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