On Monday, RBC Capital maintained its positive stance on Taylor Wimpey (LON:TW) Plc (TW/:LN) (OTC: TWODF) stock, reiterating an Outperform rating and a price target of GBP1.75.
The firm's analysis highlights Taylor Wimpey's strong position within the UK housing sector, particularly due to its strategic landbank, which is considered well-placed to benefit from potential planning reforms.
According to RBC Capital, Taylor Wimpey's landbank, which consists of approximately 140,000 plots, could sustain the company's output for around 14 years at current production rates. The analyst pointed out that the company's landbank is a mix of owned land and land held under option, with the owned portion having the potential to increase in value tenfold upon securing planning permission.
The firm also notes that land controlled or held under option by Taylor Wimpey is likely to yield a 100 to 250 basis point higher margin than land bought with planning permission on the open market. This aspect is seen as a key driver for improving the company's operating margins and returns over the medium to long term.
Furthermore, RBC Capital estimates that Taylor Wimpey has significant spare operational capacity, suggesting that the company's existing infrastructure could support a 60-70% increase in volume without the need for opening additional divisions. The analyst expects that as Taylor Wimpey utilizes this capacity, it will experience margin growth through operational leverage.
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