On Wednesday, Citi revised its stance on shares of Johns Lyng Group Ltd. (JLG:AU), downgrading the stock from Buy to Neutral and adjusting the price target to AUD4.55, a decrease from the previous AUD7.85. The adjustment follows the release of the company's fiscal year 2024 results, which Citi's analysis indicates were below expectations.
The company, which had previously been rated as a Buy, is now facing skepticism from the market due to a slowdown in organic Business-As-Usual (BAU) revenue growth momentum in the second half of FY24. According to the firm's analysis, Johns Lyng Group would need to secure 40-50% of its guided BAU revenue throughout the year to meet its targets.
Citi's report highlights concerns regarding the company's ability to sustain high-single to double-digit BAU revenue growth without further acquisitions. This is a significant point of consideration for the firm, as the Australian market may be reaching a point of maturity.
Further complicating the outlook for Johns Lyng Group is the prediction that margins will retract from their FY24 levels due to ongoing investments. Moreover, the anticipated ramp-up of AllState operations is not expected to contribute significantly until the second half of FY25.
The firm's revised stock price target of AUD4.55 reflects lower forecasts and valuation multiples, as detailed in the report. Citi's analysis suggests that the market's view of Johns Lyng Group's prospects is likely to remain cautious in the near term.
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