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Rival’s expansion plans have positive read-across to Ibstock
Ibstock (IBST) 287.4p
Loss to date: 4%
Original entry point: Buy at 299.4p, 10 May 2018
We recently updated on Ibstock (IBST) after a downbeat trading update on 24 May where it blamed cold weather for a subdued start to 2018.
However, investment bank Berenberg notes a key item of news in rival brickmaker Forterra’s (FORT) 22 May update which has positive implications for the sector over the medium-term.
Forterra has announced plans to build a new brick plant which would add 4% capacity to the UK market.
Berenberg comments: ‘As this plant is not expected to be in full production until 2022, we believe it highlights both the group’s and the industry’s positive view of the UK new-build housing market.’
Brick makers have significant pricing power thanks to strong demand from housebuilders which is only being met at present with the help of imported bricks.
Berenberg reiterates its ‘buy’ recommendations on both Ibstock and Forterra with price targets of 330p and 350p respectively.