On Tuesday, Deutsche Bank issued a revision to SIG Plc's (SHI:LN) financial outlook, reducing the company's price target from GBP0.21 from GBP0.23, while reiterating a Sell rating on the stock. The adjustment follows SIG's recent trading performance, which has fallen short of expectations, prompting a more conservative stance on the anticipated market recovery in the second half of the year.
SIG's management now projects that the company's EBIT for 2024 will be significantly below the consensus estimates, ranging between £20 million and £30 million, which is 27-51% lower than the anticipated £41 million. In response to this revised outlook, Deutsche Bank has decreased its own EBIT forecast for SIG by 31% to approximately £25 million for 2024. Projections for the following years have also been adjusted, with a 23% reduction for 2025 EBIT to roughly £44 million and a 17% decrease for 2026 to about £68 million.
The bank's analysis suggests that SIG is likely to report an earnings per share (EPS) loss in both 2024 and 2025, at -1.9p and -0.5p respectively, before potentially achieving a slight profit in 2026 of 1.3p, which would correspond to a price-to-earnings (P/E) ratio of around 19 times. Additionally, Deutsche Bank anticipates SIG to operate with a net debt/EBITDA ratio of 4.9 times in 2024, which is expected to decrease to 3.5 times by 2026.
SIG's financial position is further complicated by its €300 million secured notes, which are fixed at an interest rate of 5.25% and are bound by incurrence-based covenants only. These notes are due to mature in 2026.
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