DAVY VIEW

We have sat on the sidelines on Breedon for long enough. Brexit concerns, forced selling by major holders and a large placing have left the shares close to three-year lows. In that time, sales and EBIT have doubled without eroding financial strength. Fundamentally, the business is in fine shape. Breedon operates in well-consolidated markets where barriers to entry are high and the threat of substitution low. Demand in those markets is primarily infrastructure-led, leaving Breedon well placed to benefit from planned increases in government spending. We see further potential to grow – both organically and through acquisition – as the group judiciously deploys its financial muscle. We upgrade to ‘Outperform’ with a price target of 86p, implying upside of c.33%.