Proactive Investors - Vistry Group (LON:VTYV) shares came under further pressure on Wednesday as the housebuilder saw share price targets cut by Deutsche Bank (ETR:DBKGn) and UBS, though analysts said if the problem turns out to be a one-off the shares could bounce back strongly.
Shares in the housebuilder had tanked a day earlier after it warned profits would be lower over the next three years due to an underestimation of building costs.
Costs were said to have been understated by £115 million across nine developments within its southern division, with Vistry noting this would deal an £80 million blow to profit this year, before £30 million in 2025 and £5 million in 2026.
A ‘buy’ rating was reiterated by Deutsche as analysts highlighted Vistry’s assurances that the issues were confined, meaning the housebuilder’s medium-term targets were left unchanged.
However, Deutsche slashed Vistry’s share price target from 1,180p to 1,513p, marking a prospective rise from Tuesday's closing value of 963.5p.
UBS, meanwhile, reiterated its 'sell' rating and slashed its target price to 880p from 1,115p.
“If this proves to be a one-off problem, Vistry's shares have the potential to bounce back strongly,” Deutsche said. “However, if this proves to be a wider issue, there could be further downside risk.”
Analysts at UBS said: “The market may focus on the controls in place and whether this will end up being an isolated issue.
“As a result, we expect an increased level of scrutiny. While management stated it does not expect further issues, we understand there will now be an independent review led by the audit committee.”
Potential risks were also highlighted by UBS, if further cost issues are identified, or additional funding is needed. “In that respect we think ensuring confidence in the balance sheet strength is critical and investors may have been surprised that the £1bn shareholder return programme was reiterated by the company.
“The upside risk is the issues are truly one-off and Vistry can return to executing its growth and profit ambition (£800m EBIT by 2028).”
Vistry shares fell by 2.9% early on Wednesday.