Persimmon: Our Top UK Homebuilder Pick Amid Improving Housing Market and Policy Tailwinds

No-moat Persimmon is our preferred UK homebuilder exposure, offering the best upside among our equity coverage to improving UK housing market conditions and to potential housing policy tailwinds following a likely Labour Party victory in the UK general election in early July 2024. Persimmon’s share price has partially retracted from its cyclical low in late 2023. However, with Persimmon shares still trading on a depressed price/book multiple of 1.4 times—versus an average of 2.3 times over the course of the prior housing cycle—Persimmon's stock price fails to factor in the inevitable cyclical earnings recovery and rewarding decade ahead for the major UK homebuilder. We see significant upside with Persimmon shares trading at a steep 38% discount to our GBX 2,300 fair value estimate.