Broker snap: Electrocomponents still a sell, says Peel Hunt

30th Mar 2012 11:04

Peel Hunt has raised its target price for electrical components distributor Electrocomponents but maintained its sell rating on the stock, saying that the uncertain outlook does not warrant the current valuation.The broker notes that the firm's pre-close trading update was in line with estimates, with fourth quarter sales rising by 1% compared with 7% growth for the full-year. Peel Hunt is expecting a pre-tax profit of £117.6m for the year ending March 31st, under consensus forecasts of £120.3m. "We are raising our price target to 225p [from 180p] on the basis that, whilst the outlook is uncertain it has not deteriorated significantly since H2 last year. Also, the market has re-rated materially since then," said analyst Henry Carver.The 225p target equates to the stock trading at 12 times next year's (ending 2013) earnings. Currently, the shares are trading at a multiple of 13.5, the broker said. Carver believes that the current price "is assuming a stronger performance in Europe than the current outlook suggests".The update was taken well by the markets today with shares trading up 2.47% at 253p by 11:03.BC