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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.

Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, may fall as well as rise and the amount realised may be less than the original sum invested.

Walker Crips Group plc (Old Change House, 128 Queen Victoria Street, London EC4V 4BJ), registered in England, registered number 1432059, incorporates the following companies which are authorised and regulated by the Financial Conduct Authority: Walker Crips Investment Management Limited registered in England number 4774117 member of the London Stock Exchange, Walker Crips Wealth Management Limited registered in England number 3790291, Ebor Trustees Limited registered in England number 3514268, Barker Poland Asset Management LLP registered in England and Wales number OC341149.