Key Takeaways:
Deutsche Bank AG (LSE:DBK) slashed its price target for Vistry Group PLC (LSE:VTY) by 38% to 370p, sending shares of the UK housebuilder tumbling over 12% as concerns mount over profitability in the sector.
"Management's focus on cash generation had supported a roughly 30% year-on-year increase in sales rates, but the heavier discounting required to achieve that pace, combined with rising build cost inflation, would come at a cost," Deutsche Bank analyst Chris Millington said in a note to clients.
The German bank cut its price target to 370p from 600p but maintained a 'Hold' recommendation on the stock, which was trading at 285.6p. The downgrade was driven by a 20% reduction in pre-tax profit forecasts for 2026 through 2028, reflecting lower margin assumptions. Vistry shares fell 12.3% on the day of the announcement.
The move highlights the difficult trade-off facing housebuilders as they chase sales volume in a weak housing market while absorbing cost pressures. Vistry recently warned that its first-half profits would be "significantly" lower than last year and paused its share buyback program to conserve cash. While Deutsche Bank noted this focus on cash generation had slightly improved year-end net cash estimates, it was not enough to offset the margin concerns.
The downgrade from Deutsche Bank follows similar forecast cuts from other brokers, including Jefferies and Peel Hunt. The stock is likely to remain under pressure until the market sees signs of stabilization in earnings and the broader macroeconomic environment. Investors will be watching for government grant announcements in the third quarter, which could support a recovery in the company's affordable housing partnerships.
This article is for informational purposes only and does not constitute investment advice.
