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(Sharecast News) - Citi reiterated its 'buy' rating on BT Group on Monday and added the shares to its 'European Focus List', "because of its deep value, and as it is a clear beneficiary from improving regulatory and market conditions".
The bank noted that BT is doubling down on its strategy of building and connecting fibre to the home at pace and not limiting that to any free cash flow targets, which as a result are coming under some pressure.
"But this is temporary and in the meantime BT is delivering EBITDA growth, despite opex headwinds which should partly reverse from FY25 (energy)," it said.
"As such the asset quality is improving, core earnings are well supported and growing, while capex is at its peak and way above any other major European telco due to BT's rapid deployment and full transparency on investment (no JVs or acquisitions of fibre)."
BT replaced Deutsche Telekom on the European Focus List. Citi said it continues to rate the shares at 'buy' but has removed them from the list given the strong outperformance since March 2022 and a lack of short-term catalysts.
Elsewhere, Berenberg lifted its price target on Hill & Smith to 1,600p from 1,490p as it updated its numbers ahead of a trading update this week, to reflect the acquisitions and trading so far in FY 2023.
The bank, which maintained its 'buy' rating on the shares, said it believes the business has clearly made material progress over the past 12-18 months in terms of portfolio improvements, underlying growth and pricing given strong cost inflation, "with more to come".
In the longer term, Berenberg thinks there is a "really interesting" opportunity to build a larger business.
"The market structure within galvanising in particular is such that it makes sense to buy assets with good management teams, good baseloads of customers, a good control of environmental and regulatory risks, as well as good regional economic structures," it said.
"For instance, with circa £50m-70m spend per annum over two to three deals, over a three- to five-year period that adds up into more meaningful scale."
