In the wake of a 3% profit beat of FY21 results by Baby Bunting, Morgans downgrades its rating to Hold from Add on valuation. However, the company is considered very well positioned to further grow market share and compound growth for investors.
The broker highlights strong second half gross margin expansion comfortably offset higher opex. The analyst lowers FY22 and FY23 EPS forecasts by – 2% and reduces the target price to $6 from $6.39.
Mature store level margins now sit at 19% from 17% previously, which provides upside to the long-term group earnings (EBITDA) margin target of 10%, likely now 12%, estimates Morgans.
Sector: Retailing.
Target price is $6.00.Current Price is $5.71. Difference: $0.29 – (brackets indicate current price is over target). If BBN meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges – negative figures indicate an expected loss).
