UK construction tough but buying opportunities exist, says Berenberg

by | Sep 4, 2023

(Sharecast News) – Broker Berenberg expects the UK construction market to flatline in 2024 before returning to growth, and highlighted a number of key buying opportunities for investors.

Berenberg said 2023 will likely be “one of the most challenging years in recent history” for the UK construction sector, with activity down 10%.

Residential volumes will fall 21% overall – owing to the surge in mortgage rates, the cost-of-living crisis and subsequent falling demand – compared with just a 3% decline in non-residential building and a 1% increase in civil markets.

“While construction markets remain challenging, we think we are close to the trough in most markets and while we do not anticipate any material recovery in 2024, we think this backdrop presents plenty of attractive investment ideas,” the broker said.

“The silver lining of a brutal 2023 is that it makes for an easier base for 2024 and we forecast no further declines, in total, next year, although we also stop short of forecasting growth with our 0% estimate. Beyond 2024, we think the UK construction returns to its trend long-term growth of c2% per annum, on average, underpinned by a new housing market that still remains fundamentally undersupplied and well-below government targets. ”

Berenberg highlighted six key ‘buys’ among UK-listed construction stocks: Berkeley (5,100 target price) on the strength of its order book, forward sales position and cash generation approach; Grafton (1,050p target price) on its capital allocation and investment opportunities across Europe; Genuit (400p target price) due to the growing demand for sustainable construction products; Howden (870p target price) with its expanding depot network, improving distribution and international potential; Volution (500p target price) with regulatory developments expected to drive demand for its energy-efficient ventilation products; and Hill & Smith (2,000 target price) on its potential to expand its North American operations.

Related articles

Shore Capital upgrades Supermarket Income REIT to ‘hold’

Shore Capital upgrades Supermarket Income REIT to ‘hold’

(Sharecast News) - Shore Capital has upgraded its recommendation for Supermarket Income from 'sell' to 'hold', saying that the real estate group's full-year results demonstrated "portfolio resilience" in the second half. The company, which holds a portfolio of 51...

Berenberg sees upside risk to profits at Gym Group

Berenberg sees upside risk to profits at Gym Group

(Sharecast News) - Berenberg has reiterated its 'hold' rating on Gym Group after the company's positive interim results last week, but said that some upside risk to forecasts remains this year. "While we think that there is an opportunity for a recovery, we are still...

Latest Articles

Time for Japan to act (II): State Street Global Markets

Time for Japan to act (II): State Street Global Markets

Written by Michael Metcalfe, Head of Macro Strategy, State Street Global Markets  Writing ahead of the September BoJ gathering in 2022, we argued in Time for Japan to act (first edition!) that the authorities should begin monetary tightening both through moving the...

Europe open: Shares slide on hawkish Fed as eyes turn to BoE

Europe open: Shares slide on hawkish Fed as eyes turn to BoE

(Sharecast News) - European stocks opened in the red on Thursday after hawkish comments from the US Federal Reserve on future rate rises dampened sentiment and investors turned their attention to the Bank of England's own policy meeting. The pan-European Stoxx 600...

Capita signs two new contracts worth £565m

Capita signs two new contracts worth £565m

(Sharecast News) - Outsourcing group Capita said it has signed two new contracts with the UK and Northern Ireland governments worth a combined £565m. Four months after Capita was selected as the preferred bidder, the group has now confirmed it has sealed the deal to...

Rise in UK borrowing limits Hunt’s scope for tax cuts

Rise in UK borrowing limits Hunt’s scope for tax cuts

(Sharecast News) - Britain's budget deficit in August was slightly higher than expected, according to official data published on Thursday, meaning Finance Minister Jeremy Hunt will have less scope for tax cuts ahead of the General Election. Public sector net borrowing...

Join our mailing list

Subscribe to our mailing list to receive regular updates!

No Fields Found.
x