Broker snap: High expectations for Mulberry

Broker finnCap has substantially increased its target price for luxury goods group Mulberry as the group continues to outperform revenue and profit expectations.The upmarket handbag maker's impressive interims, with pre-tax profit of £5.7m beating the finnCap's estimate of £4m, prompted the broker to lift its target price for the stock sharply from 490p to 1,040p."This outperformance was restrained by inventory shortages, although even that cloud had a silver lining: gross margin widened from 55.0% to 63.9%," said analyst David Stoddart.As the second half has started well, the broker's pre-tax profit forecast for 2011 is increased by 15.6% to £15m and earnings per share by 36.9% to 17.8p. What's more, Stoddart says the upgrades may not mark the end of the upgrade cycle this year as the increases cover only the outperformance in the first half.The broker remains a 'buyer' as it continues "to regard the global potential for the brand as substantial". Mulberry Group