Deutsche Bank has trimmed its price target and profit forecasts for Bellway PLC (LSE:BWY) but maintained its ‘buy’ rating on the UK housebuilder.
The bank reduced its price target by 8%, lowering it to 2,685p from a previous target of 2,917p.
Deutsche Bank analyst Chris Millington noted that Bellway’s guidance midpoint points to a 5% year-on-year fall in volumes for the period ahead.
In response to that weaker volume outlook, the bank cut its pre-tax profit estimates for the 2027 and 2028 financial years by 16% and 11% respectively.
The broker said those reductions reflect margin pressure stemming from competitive pricing, bulk sales, and rising build-cost inflation across the sector.
Millington wrote that the revisions bring Bellway’s forecast margin closer to peers and better reflect the challenging trading backdrop the company now faces.
The weaker forward outlook stands in contrast to Bellway’s 2026 financial year results, which met expectations as volume growth more than offset the margin pressure encountered during the period.
Deutsche Bank also highlighted Bellway’s strong cash generation as a positive factor, alongside the company’s announcement of a further £150 million share buyback programme.
On its revised forecasts, Deutsche Bank values Bellway at 0.6 times net tangible asset value and approximately 14 times earnings for the 2027 financial year.
The bank pointed out that the current net tangible asset valuation sits only 10% above Bellway’s post-pandemic lows, underscoring the degree to which market conditions have weighed on sentiment.
Alongside the buyback programme, Deutsche Bank sees earnings beginning to recover in the 2028 financial year, which underpins its continued positive investment view on the stock.
Despite the near-term headwinds, the combination of capital returns and an anticipated earnings recovery appears sufficient for Deutsche Bank to hold its constructive stance on Bellway shares.
