Broker tips: Hargreaves Lansdown, Pets at Home, Rathbones

(Sharecast News) - Analysts at Peel Hunt reiterated their 'buy' recommendation for shares of Hargreaves Lansdown following the firm's full-year numbers, telling clients the results were "well ahead of expectations". Underlying profits came in at £212.0m, ahead of estimates of £179.0m, the dividend was raised by 3.6% and net new business rose by £1.6bn, also beating expectations for a print of £1.5bn.

"We are currently expecting underlying PBT/EPS of £345m/57.4p (company-compiled consensus stands at £358m/60p)," said Peel Hunt, which reiterated its 1,220.0p target price on the stock.

"Expect to increase by high single-digit percentage given the extra interest income, with slightly more benefit in the following year. Before any changes, the stock is trading on December 23E EV/EBIT of 13x, well below other platforms."

Berenberg lifted its price target on Pets at Home to 430.0p from 370.0p on Wednesday and reiterated its 'buy' recommendation as it said the upgrade cycle wasn't over.

The bank said the retailer's continued strong momentum should go some way to allaying fears regarding the impact of the post-Covid normalisation in pet spending and the difficult macroeconomic backdrop.

"Furthermore, although the recent upgrade leaves FY23 expectations well set, we believe that further upgrades are likely moving into FY24, while an attractive medium-term equity story remains," it said.

Berenberg said there are a number of factors that make Pets an attractive medium-term story - including a favourable underlying market, with Euromonitor forecasting the UK pet care market to grow by 3-5% per year in the coming years, well-executed strategic initiatives, including ongoing momentum in its puppy and kitten club membership scheme, a high-growth, high-margin vet business, and balance sheet optionality.

Investec downgraded wealth manager Rathbones to 'hold' from 'buy' on Tuesday after the shares outperformed the sector by over 30% in the past 12 months, making the risk/reward dynamic less attractive.

Investec, which cut its price target on the stock to 2,195.0p from 2,285.0p, said that despite this valuation call, it continues to acknowledge the group's position within an industry which should enjoy medium-term structural growth and cannot rule out the potential of it being a consolidation target.

Still, Investec said this was unlikely until the company's current IT programme and acquisition integration is closer to completion.

At the FY22 results on 1 March, Investec expects Rathbone to announce underlying pre-tax profit of £97.3m, marginally ahead of the FactSet median of £95.8m, albeit down 19% year-over-year.

It also expects the group to declare a full-year dividend of 83.0p a share, up 3%, consistent with its progressive dividend policy.