Morgans conducts a review of the retail sector and assesses there continues to be several consumption tailwinds in place. These include strong housing, ultra-low interest rates and likely inability to travel offshore until 2022.
Additionally, there is the rising Australian dollar, solid household savings and the likelihood of less snap lockdowns as vaccines roll out, explains the broker.
The analysts highlight Adairs where the valuation simply doesn’t reflect the strength of the business. The stock is considered to trade at a discount to most peers and Morgans are confident earnings will normalise at a level materially higher than pre-covid.
The Add rating and $4.50 target are retained. Morgans highlights Mocka could reach over $100m of sales in Australia over time versus $35m today.
Target price is $4.50.Current Price is $4.01. Difference: $0.49 – (brackets indicate current price is over target). If ADH meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges – negative figures indicate an expected loss).