Berenberg initiates coverage of these two mid-cap U.K. names

Investing.com - M&C Saatchi’s (LON:SAA) non-advertising business is to lead growth at the company until 2027, according to analysts at Berenberg.

In a note launching their coverage of the creative solutions agency, the strategists predicted that M&C’s divisions like consulting and media would grow at a combined 5% in the period from stretching from its prior fiscal year to 2027. Earnings before interest and taxes margin at M&C’s non-advertising units was 25.3% in 2024, they noted, flagging the figure was 11.2% at its advertising segment.

"The non-advertising business is less cyclical and therefore the earnings quality will continue to improve as it increases as part of the overall mix," the analysts said.

Group-wide revenue is tipped to increase by 3% during that same period, they predicted, adding that the firm’s management is also "delivering cost efficiencies." In 2024, M&C, whose clients include firms like Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL), delivered 10 million British pounds in annualized savings and has targeted an additional 3 million pounds in efficiencies this year. EBIT margin is seen expanding to 16.3% by M&C’s 2027 fiscal year.

The analysts gave M&C a "buy" rating and set a price target of 240p, indicating an increase of roughly 23% from its current level.

Elsewhere, the Berenberg analysts also began coverage of specialist manufacturer and steel panel radiator distributor Stelrad (LON:SRAD) with a "buy" rating and placed a price objective on the mid-cap U.K. stock of 200p.

"Management has set out a medium-term strategy to grow market share by 1-2%, to increase the contribution per radiator above GBP21 and to increase the operating margin to 13%," the analysts wrote.

"With the evidence at hand, we think these targets are achievable and, as European new-build and repair, maintenance and improvement volumes recover, we think the group could go further."