Buy ‘capital regenerator’ Berkeley Group Holdings, says HSBC

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.

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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.

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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.”

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