Canaccord Genuity raises target price on Tyman

Analysts at Canaccord Genuity raised their target price on construction materials group Tyman from 400.0p to 450.0p on Tuesday, citing recent sector and macro news flow that they felt was pointing to “a strong recovery” in demand.
Canaccord stated the recovery in Tyman’s key markets looked to be “well embedded” and “more than just a result of stronger order books and pent-up demand”, as feared earlier in the year.

The Canadian bank, which stood by its ‘buy’ rating on the stock, noted that underlying demand in the US and UK appeared to be “very strong” in the housing and repair, maintenance and improvement markets and reiterated that it had already increased its “cautiously struck” UK and US estimates earlier in 2021.

“Housing and RM&I markets in the US are very strong (housing permits above 1.7m and a strong NAHB survey) and the recent announcement of Biden’s infrastructure plan should be incrementally supportive over the medium term,” said the analysts.

“While cost inflation and servicing customers continue to be a challenge for the industry, a backdrop of strong demand should be conducive for pricing and result in good overhead utilisation. Recent industry news flow in the UK shows good underlying demand and supports our higher estimates for the UK business.”

Looking out to the medium-term, Canaccord said it expects Tyman’s upcoming capital markets day to present “a positive message” on the opportunity to drive organic growth in areas such as new product development and distribution channel expansion.

“Although stepping up M&A spend this year would arguably be an unnecessary distraction for management, a strengthening balance sheet and opportunities to infill the business portfolio suggest acquisition-driven growth is likely to become an important part of the investment case from 2022,” said Canaccord, which also pointed to continued near-term momentum for the firm.

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