Broker sees big upside on Baby Bunting - $3.70 target

Broker Barclay Pearce Capital (BPC) has a Buy recommendation on Baby Bunting (ASX:BBN), with a target price of $3.70 (vs current price of $2.10).

Baby Bunting operates as a retailer of maternity and baby goods, targeting parents with children from newborn up to three years of age and parents-to-be.

The firm’s product categories include prams, cots and nursery furniture, car safety, toys, babywear, feeding, nappies and manchester.

It also offers baby related services including safety accredited car seat fitting, and the hire of nursery and travel safe products.

In the last half, Baby Bunting reported revenues of $254.9m, up 6.6% from the pcp.Over the last three years, sales have grown 36.7%, noting that all Baby Bunting stores remained open during the Covid period. As life has normalised, the market share gains made through Covid have predominantly been held onto.

Post-COVID, the nursery essentials – being the company’s core category – continue to grow strongly and were up 12.7% in the half (over three years, this category is up 39.4%).

BBN has advised that it expects full year FY23 NPAT to be in the range $21.5-24m, compared to market expectations of $23.6m.

Revenue is forecast to increase to $584m in FY24, and $639m in FY25.

Meanwhile, EBITDA is expected to be $72m in FY24, and $82m in FY25.

“We are updating our recommendation from Underperform to Buy,” said BPC.