Persimmon: Relief From Searing Build Cost Inflation Yet to Materialize in Late 2023; Shares Appeal

Persimmon delivered a somewhat mixed third-quarter trading statement that featured positive news regarding its home completion volumes in late 2023, in tandem with a disappointing update on the near-term trajectory for build cost inflation. With Persimmon fully forward sold for the current fiscal year, the no-moat homebuilder has lifted its full-year 2023 home completion guidance to 9,500 homes, a 6% increase relative to previous guidance and our prior forecast of 9,000. However, build cost inflation has remained more stubborn than previously anticipated, with Persimmon expecting full-year 2023 build cost inflation in the range of 8%-9%, tracking above our prior full-year forecast for 6%. Consequently, our full-year EBIT and EPS forecasts of GBP 358 million and GBP 0.81, respectively, are little changed despite Persimmon’s upgrade to its volume outlook for 2023. Persimmon shares are up about 4% at the time of writing but remain materially undervalued, in our view, trading at a steep 51% discount to our unchanged GBX 2,300 fair value estimate.