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Berenberg raises target price on Pets At Home

By Iain Gilbert

Date: Monday 24 Feb 2020

Berenberg raises target price on Pets At Home

(Sharecast News) - Analysts at Berenberg hiked their target price on animal products retailer Pets At Home from 210.0p to 300.0p on Monday, noting the group's new management team had transformed both the company's fortunes and investor perceptions.

Berenberg said it was "increasingly confident" that Pets At Home will be able to "outperform current consensus expectations" but added that its sum-of-the-parts valuation suggested the potential upside was already priced-in to a significant degree.

"As a result, although we are positive about the outlook for Pets, we maintain our 'hold' rating," said Berenberg.

The German bank pointed out that PAH's retail unit appeared "rejuvenated", with like-for-like sales growth of more than 7% in the first three quarters of 2020.

However, with consensus numbers forecasting like-for-like sales growth normalising to only 3% from 2021 onwards, Berenberg thought that figure could prove to be "overly conservative" given current momentum and the potential for a wave of store refurbishments that could drive "another leg of strong LFL growth".

Berenberg also praised Pets for cleaning up its veterinary division, with the business itself now performing "exceptionally well".

"Customer sales across the c430 first opinion practices are growing at a double-digit percentage rate, and the company-owned specialist referral centres are growing at close to 10% per year," said Berenberg.

"Those referral centres make up about one-third of Vet Group sales, and should grow substantially over the next 12-24 months, with a new site in Scotland and an extension to the largest existing site (Dick White Referrals) set to almost double capacity."

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