Adairs’ first half result was slightly above Morgans earnings (EBIT) and profit (NPAT) forecasts as management executed well on product, attracted new customers and gained market share.
Retaining these new customers will be key for when demand ultimately normalises, although Mocka should provide continued strong growth in years to come, opines the broker.
Morgans lifts FY21 EPS forecasts by 14% and 3-6% thereafter, with outer year upgrades largely reflecting more bullish assumptions around Mocka sales rates domestically and margins.
The Add rating is maintained and the target price is increased to $4.50 from $4.00.
Target price is $4.50.Current Price is $4.04. Difference: $0.46 – (brackets indicate current price is over target). If ADH meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges – negative figures indicate an expected loss).