Broker snap: Investec ups forecasts for Halfords after H1 beat

7th Nov 2013 09:32

Investec has reiterated its 'buy' rating for car- and bike-parts retailer Halfords and upgraded its forecasts after first-half profits came in 'materially ahead of consensus'.Profit before tax (PBT) in the first six months of the year rose 6.4% to £44.6m, well ahead of the £38.9m forecast by analysts."Sales growth is what the market wanted and after knock-out Q1 Retail sales, strong momentum continued in Q2," said analyst Kate Calvert."Retail is back on form helped more by the weather, a buoyant cycling market and backing key categories with more stock to help availability rather than the recently announced 'Getting into Gear - 2016' strategy launched in May, which is yet to have an impact."She also said that the first-half beat was entirely due to the strong performance in Retail, with like-for-like sales up 7.7%. Trading in Autocentres was "disappointing but not key to [a] recovery".The broker has raised PBT estimates for the years ending March 2014 and 2015 by 13% after the first-half result and lower cost guidance for the second half.Calvert said: "While still early days in [Chief Executive] Matt Davies' three-year recovery strategy, these results should help to reassure doubters that Halfords' brand still resonates well in consumers' minds. "With the benefits of the strategy yet to come, we believe the future profit trajectory can support a price/earnings ratio sector premium and raise our target price to 520p [from 460p], in-line with our forecast upgrade."The stock was up 11.9% at 468.52p in morning trade on Thursday.BC