Shore Capital keeps 'hold' on Marks Electrical despite guidance upgrade

(Sharecast News) - Shore Capital has kept a 'hold' rating on Marks Electrical despite the online electrical retailer lifting its full-year profit outlook on Monday

The company expects revenues of £108.5m over the financial year to 31 March, down 7.4% year-on-year, though this partly reflect its "deliberate focus by the company on higher-margin sales channels as it looks to rebuild profitability", Shore Capital said.

Adjusted EBITDA guidance, meanwhile, was lifted to £2.65m from the £2m-plus range given just three weeks ago, while the net cash position excluding leases was raised to £4.45m from £3.5m-4m.

Guidance for next year was also "encouraging", Shore Capital said, with the firm pointing to growth in both revenue and profitability in FY27.

"Following the positive news in the pre-close trading update on 26 March, we are pleased to hear that following a better-than-anticipated end to the year, management is again raising profit and cash expectations for FY26F," Shore Capital said.

Despite the upgrades, Marks is now trading at an enterprise value-to-EBITDA ratio of 15x, down from the 17x mark hit recently but "still relatively high as a result of profit levels remaining suppressed", the broker said.

"The question now is whether Marks can deliver on guidance of both top and bottom-line growth at which point these multiples could quickly become more attractive. While the high level of geopolitical uncertainty leads us to caution in our outlook on the UK, we are increasingly warming to the recovery story at Marks. For now, we maintain our 'hold' rating and target price of 50p with upside risk," Shore Capital said.

Marks Electrical shares were up 4.0% at 49.4p by 1100 BST.

Marks Electric