Broker snap: Panmure sees good buying opportunity at Halfords

21st Nov 2012 10:25

Halfords Group's first-half results on Wednesday may have been met with profit-taking by investors, but Panmure Gordon reiterated its 'buy' rating and 400p target price for the stock, saying that there's still 'lots of opportunity' for the business.The car and bike parts retailer's pre-tax profits came in at £41.9m, down 23% year-on-year but still at the top end of guidance, "which is encouraging", according to Panmure.The company also maintained its full-year guidance for pre-tax profits of £66-70m.Panmure said: "We think that Halfords can grow significantly faster than consensus. We are 15% and 37% above consensus for FY2014 and FY2015 respectively, driven by fast payback from investment in service. "Shorter term, we expect pretax profits for FY2013 to be broadly in line with guidance, although we expect Q3 to be difficult."The broker said that the company is operating in "fragmented markets" and is a trusted brand, but thinks that it is significantly underperforming its potential."We think that there are a few easy wins and that investment in a service-based culture can unlock a substantial sales and profit opportunity. Therefore, we view the opportunity to 'buy' into Halfords at just 11x trough earnings as a good entry point, as its valuation moves into line with other fast-growing, cash generative retailers."Shares were down 6.92% at 321.13p in morning trade.BC