On Friday, Berenberg increased its price target on Talanx (ETR:TLXGn) (TLX:GR) (OTC: TNXXF) shares to EUR95.30, up from the previous EUR91.10, while reaffirming a Buy rating on the stock. The adjustment follows a notable performance by Talanx, with its share price escalating by 46% in 2023 and an additional 27% in 2024. Despite these gains, Berenberg believes the stock remains substantially undervalued, with a 15% potential upside to the new target.
The firm's positive stance is backed by several key factors. First, Talanx's reported earnings for 2024 have been deemed significantly understated. Berenberg estimates that the company bolstered its resiliency reserves by EUR1 billion in 2024, bringing its total buffer against future financial shocks to an estimated EUR4.7 billion. This strategic move strengthens the company's financial foundation and positions it to better withstand potential market volatility.
Another compelling reason for the firm's optimism is the anticipated growth in Talanx's dividends. Based on the company's guidance, dividends are expected to increase at a compound annual growth rate (CAGR) of 14% from 2024 to 2027. Moreover, there is potential for even greater dividend growth, driven by an anticipated acceleration of cash remittances from Talanx's core primary operations.
Lastly, Berenberg projects a significant improvement in the Retail Germany nonlife EBIT segment of Talanx's business. The forecasted turnaround is attributed to the company's cost-cutting initiatives and to expected rate hikes in the German motor insurance market. These developments are seen as positive indicators of the company's future profitability and operational efficiency.
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