Broker snap: Panmure ups target for Sainsbury's after H1 beat

13th Nov 2013 10:27

Panmure Gordon has upped its target price for UK grocery chain Sainsbury's after a better-than-expected first half and continued outperformance against its rivals.Sainsbury's reported a 7% increase in interim pre-tax profit to £400m, slightly ahead of the consensus forecast for £394m. The broker also said that the margin expansion experienced during the first half was a "very good performance".Panmure said that Sainsbury's is "ticking the boxes" with 35 straight quarters of like-for-like growth and its highest market share for a decade (16.8%). Meanwhile, it pointed out that the company remains on track for £100m of cost savings this year and is now guiding to mid single-digit basis-point margin expansion.Following the results, the broker has raised its fully diluted earnings per share forecast for the current year (ending March 2014) from 29.1p to 32.6p and lifted next year's estimate from 31.2p to 35p."Sainsbury's is the only 'Big Four' grocer that is taking market share, and that comes from being the only one, in our view, that isn't in the process of rectifying previous strategic mistakes, whether it be lack of exposure to growth channels (c-stores and online) in the case of Morrisons or a portfolio of overly large stores in the case of Tesco."While Panmure maintained its 'hold' rating on the stock, it raised its 12-month price target from 400p to 425p "on the assumption that the current rating of 12.2x P/E [price-to-earnings] and a 4.4% dividend yield will roll-over to 2015E in due course".The stock was up 3.99% at 414.7p by 11:08 on Wednesday.BC