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Deutsche Bank upgrades Superdry, says de-rating overdone

11/07/2018 10:33

(Sharecast News) - Superdry's de-rating is overdone and the valuation is now attractive, Deutsche Bank on Wednesday as it upgraded the clothing brand to 'buy' from 'hold' and lifted the price target to 1,610 from 1,430p. DB said that like the company's pricing policy, its share price now reflects value for money.

Concerns around its store like-for-like performance and its brand health have driven a de-rating of over seven price-to-earnings points since January, it said. "At 12.2x calendar 18 earnings, it trades in line with Next and M&S.

However, with double-digit profit growth forecast as well as a long term global opportunities, Superdry's investment thesis is far more exciting. "We believe now is an attractive entry point into a story with self-help opportunities, margin expansion potential and strong cash generation." Earlier this month, Superdry announced a special dividend as it reported a rise of more than 11% in annual profit. Underlying pre-tax profit for the year to 28 April jumped 11.5% to £97m, in line with expectations, as revenue increased 16% to £872m.

Statutory pre-tax profit fell 23% to £65.3m because of fair value movement on forward exchange contracts and a write-down on the value of a Berlin store. At 1030 BST, the shares were up 1.4% to 1,363p.

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