Broker tips: Currys, Tate & Lyle, Dechra Pharmaceuticals, GlaxoSmithKline, AstraZeneca

(Sharecast News) - Analysts at Berenberg initiated coverage on electrical retailer Currys, formerly Dixons Carphone, with a 'hold' rating and 70.0p target price on Thursday, stating it was waiting for a "milder backdrop". Berenberg said that with "a credible strategy" to rebuild the profitability of its UK and Ireland business, an "underappreciated" Nordic presence, and a "sustainably stronger" balance sheet, there were several reasons to believe that there is upside to Currys' share price on a medium to long-term view.

However, given the group's exposure to the "increasingly difficult macroeconomic backdrop", the analysts remain cautious about the demand outlook for the sector and also noted that the group posted a double-digit like-for-like decline in key categories during the GFC in 2009.

"Our FY 2023 adjusted PBT forecast lies 7% below consensus. On our estimates, Currys trades on 9.3x CY 2023 EV/EBIT and 6.3x P/E," said the German bank.

Citi upgraded Tate & Lyle on Thursday to 'buy' from 'hold' as it argued that energy headwinds were manageable and that medium-term upside was not reflected in the valuation.

"Although near-term it is more exposed to gas inflation than peers, we estimate that downside to consensus EBIT is limited to mid-single-digit percentage in FY24 once adjusted for pricing and self-help, and after de-rating versus FTSE250, valuation is attractive," said Citi.

The bank said it likes Tate for its "transformational story" with defensive characteristics, and thinks it can deliver a 9% normalised EBIT compound annual growth rate, which was not appreciated at current levels.

"Further upside comes as it narrows the valuation discount to higher-multiple ingredients names," Citi added.

Analysts at RBC Capital Markets lowered their target price on veterinary drugmaker Dechra Pharmaceuticals from 4,200.0p to 4,000.0p on Thursday following the group's full-year results a week earlier.

RBC Capital Markets said it had updated its model on Dechra after the results and to also reflect the firm's major acquisitions of Piedmont and Med-Pharmex.

For the 2023 and 2024 trading years, RBC said it was roughly 3.2% and 5.1% ahead of consensus on revenue, respectively, and 3.9% and 6.8% below on earnings per share estimates.

However, the Canadian bank said it sees "meaningful improvements" in the medium term with a 2023-26 earnings per share compound annual growth rate of 52%, and believes recent deals have "greater merit" than just the numbers alone, increasing Dechra's intrinsic value.

"We value Dechra in 18 months using a FY23e P/E of 29x and EV/EBITDA of 20x. These represent a 10% (from 15%) discount to market leader Zoetis due to Dechra's smaller size and lower growth rate," said RBC, which reiterated its 'outperform' rating on the stock.

"This leads to a fair value of £36 to which we add our risk-adjusted valuation of £4 for Dechra's novel portfolio pipeline, for a total of £40 (from £42 previously) with the move in PT driven mainly due to lower valuation multiples from peers."

Credit Suisse upgraded GlaxoSmithKline on Thursday but downgraded AstraZeneca as it took a look at the pharmaceuticals sector.

The bank upped GSK to 'neutral' from 'underperform' but cut the price target to 1,430.0p from 1,630.0 and stated the valuation provided support despite Zantac uncertainty. CS also said the target price now includes an assumption of $5.0bn base case Zantac liability costs.

CS said recent underperformance in GSK shares has been driven by Zantac concerns, which are likely to remain an overhang for some time, with any outcome of litigation likely to take some years to play out.

Elsewhere, Citi downgraded AstraZeneca to 'neutral' from 'outperform', keeping its price target on the stock at 11,000.0p. It said AstraZeneca continues to score well in its 'PharmaValues 2023 Strategic Analysis'.

"AZN has a leading score for pipeline Replacement Power, Growth 2021-25 and portfolio Marketing Burden," CS said. "However, following strong year-to-date stock price performance, EV/NPV valuation is less attractive."

Credit Suisse said this underpins its view that investors were now familiar with many of the positive near-term drivers including Enhertu and lung cancer drug DS-1062.