Investing.com — Jefferies has named this northern-focused housebuilder its top sector pick even as it slashed price targets across the board, warning that the Iran conflict could push its forecasts as much as 25% below market consensus.
Jefferies named its top pick among UK housebuilders, which also include , , , and , cutting Persimmon’s price target to 1,591p from 1,792p while maintaining a “buy” rating.
The brokerage held Barratt Redrow at “hold,” cutting its target to 289p from 418p, while reducing Bellway’s target to 2,394p from 3,463p, Crest Nicholson’s to 164p from 230p and Taylor Wimpey’s to 105p from 136p, all on Buy ratings. Berkeley Group retained a “buy” with a target of 4,598p.
Jefferies cut completion growth forecasts to 2-5% for volume housebuilders in 2027 and 3-4% for fiscal 2028, incorporating a flat sales rate assumption for 2026 and no future rate cuts or government demand support.
The brokerage assumed build cost inflation rising to 4-5% and limited to no house price inflation, projecting EBIT margins to fall 0-1.5 percentage points in 2027 before recovering in 2028.
Despite the cuts, Jefferies argued sector valuations already reflect a downside scenario, with stocks trading on single-digit price-to-earnings multiples and at discounts of up to 60% to net tangible asset value. Sector return on capital employed for 2027 ranged from 5.9% to 13.7% against price-to-net tangible asset value of 0.38x to 0.90x.
On Persimmon specifically, the brokerage pointed to its vertical integration, northern geographical focus and expanding Charles Church product offering as key buffers.
“With ROCE already ahead of cost of capital, we see the stock at 0.95x P/NTAV as too cheap,” Jefferies wrote, adding that the single-digit P/E on 2027 earnings, with volume and margin upside should demand prove more resilient, was the clearest illustration of value.
On Berkeley, Jefferies said the company could return more than 100% of its market capitalisation to shareholders through dividends and buybacks over five years, while retaining 15 years of land, net cash and a 15% ROCE by the start of the next decade.
The brokerage cautioned that trading updates over the next 12-24 months would “likely prove uncomfortable” as sales and order books adjust to match build activity.
Jefferies said curtailed land buying and slower investment in work-in-progress, neither of which is yet reflected in its forecasts, could create additional scope for capital returns to shareholders across the sector.