HSBC Global Research has initiated Berkeley Group Holdings with a ‘buy’ rating, citing BKG’s focus on developing brownfield sites and forecasting £849m in share buybacks and dividends over FY25-27.
HSBC have given Berkeley Group a 5410p price target suggesting around 17% upside from the time their note was published.
Contributing analysts Daniel Cowan and Matthew Lloyd attribute the term ‘Capital Regenerator’ to Berkeley due to the group being the UK’s only large-scale developer regenerating brownfield sites.
Although HSBC notes constraints with the current planning system, Berkeley is aligned with the government’s long-term homebuilding strategy to develop brownfield sites and is well-placed with an unrivalled land bank.
Placing Berkeley above peers, HSBC’s research found BKG’s pre-tax profit growth of 5% over a 20-year period exceeded 3% for the wider housebuilding peer group. Analysts say this has provided the group with greater visibility and allowed for substantial shareholder returns.
In a recent trading update, Berkeley reaffirmed guidance of £1.5bn pre-tax profit in the three years ending 30th April 2026. Profit guidance for the current year is £550m.
Outlining their price target, HSBC analysts wrote in a note:
“We set our TP at 5410p (rounded), which implies c17% upside. We use a target EV/IC multiple of 1.8x, which we derive from estimated ROIC, WACC and long-term growth. Our forecasts assume no pick up in investment and a subdued operating environment in line with management’s outlook. Our valuation also takes into account the full distribution of FY24e-FY27e net income.”
“We rate Berkeley a Buy as we believe it is unusually well positioned for when planning and market conditions improve, given its rare expertise in large-scale urban brownfield regeneration. Ultimately, investors are being paid to wait for better times, in our view.”