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Investing.com - UBS has upgraded DFS Furniture PLC (LON:DFS) from Neutral to Buy and raised its price target to GBP2.10 from GBP1.30, citing improved sales visibility and growth prospects.
The furniture retailer reported a 10% increase in order intake for fiscal year 2025, excluding calendar effects. With delivery lag times of approximately two months, this growth provides strong sales visibility for the first half of fiscal year 2026, according to UBS.
While UBS acknowledges headwinds from National Living Wage and National Insurance Contributions increases since April, as well as uncertainty surrounding the upcoming UK Autumn budget, the firm forecasts 5% year-over-year revenue growth for DFS in fiscal year 2026.
The research firm notes that DFS has significantly reduced its debt levels, supported by robust positive free cash flow from higher profit-before-tax drop through. The company is on track to meet its leverage targets by fiscal year 2026, potentially allowing dividend resumption.
UBS considers the current valuation of 4.8x fiscal year 2026 EV/EBITDA undemanding and sees "material upside as the earnings cycle turns," supporting the upgrade to Buy with the new price target of 210 pence.
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