On Friday, RBC (TSX:RY) Capital Markets sustained their positive outlook on Ibstock Plc (IBST:LN) (OTC: IBJHF) stock, as the firm reiterated an Outperform rating with a steady price target of GBP2.00. Following the full year 2024 trading update, RBC Capital analysts have adjusted their projections to account for a postponed surge in volume and an advance in fixed costs associated with reinstating capacity. These revised figures were partly compensated by an increase in clay brick prices.
Ibstock, a prominent manufacturer of clay bricks and concrete products in the United Kingdom (TADAWUL:4280), is expected to witness a pivotal rise in volumes starting in fiscal year 2025, according to RBC Capital's analysis. The analysts believe that Ibstock's normalized adjusted earnings per share (EPS) could exceed three times the forecasted EPS for fiscal year 2024, bolstered by additional free cash flow (FCF) tailwinds.
Despite the recent adjustments, the firm's discounted cash flow (DCF) price target remains at 200 pence. This decision reflects a balance between the rollover effects and the near-term earnings reductions. The analysts highlight that Ibstock's shares are currently trading at approximately 18 times the projected earnings for fiscal year 2025, which is anticipated to drop to around 8 times when considering the normalized adjusted EPS. This is compared to a long-term average price-to-earnings (P/E) ratio of 12 times.
RBC Capital's stance on Ibstock is supported by the company's strong fundamentals and the expectation of a significant increase in volumes in the near future. The firm's analysis indicates a robust potential for growth in earnings and cash flow, which underpins their unchanged price target and positive rating.
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