Bellway PLC (BWY.L): FY‘27 margin hinges on sales rate momentum and build costs

Research evidence excerpt

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11 Aug 2026 08:08:16 ET │ 13 pages

Bellway PLC (BWY.L)

FY'27 margin hinges on sales rate momentum and build costs

CITI'S TAKE

Buy

Price (11 Aug 26 08:23)

£20.74

Target price

£25.00↑

from £23.00

Expected share price return

20.5%

Expected dividend yield

3.6%

Expected total return

24.2%

Market Cap

£2,333M

US$3,151M

FY26 trading update outlined strong volume performance while

management maintained a sensibly cautious outlook amid challenging

market conditions, emphasizing cost discipline, capital efficiency and

cash generation to mitigate softer demand and build-cost inflation

pressures. FY27 volumes should remain resilient by outlet growth and a

rising bulk-sales contribution, although underlying private sales rates are

likely to remain under pressure, necessitating continued use of incentives

but we think the key debate for FY27 is margin durability. Sales-rate

momentum, along with build-cost inflation, are likely to be the primary

determinants of margin progression. While near-term margins face

pressure from incentives and bulk sales, we believe margins should

recover over the cycle. The market may look through near-term earnings

pressure and place greater value on the company's strong balance sheet,

disciplined land strategy and improving asset turns to justify sustaining a

premium EV/CE multiple. We raise our TP to £25.0 (from £23.0). Maintain

Buy.

Ephrem RaviAC

Omnath P Sinh

Model Update — We lower our FY27-28E operating profit estimates by c.8-10%,

reflecting weaker sales-rate assumptions and higher build-cost inflation, which are

expected to weigh on margin recovery. Our EV/CE multiple is revised to 0.9x in our

valuation. In spite of challenging market conditions we believe this multiple is still

supported by the company's strong balance sheet, disciplined land replacement

strategy and improving asset turns. As the revised EV/CE multiple offsets our

earnings downgrade, we revise our TP to £25.0 (from £23.0) and reiterate our Buy

rating.

Bellway PLC (GBP)

Year to 31 Jul

2024A

2025A

2026E

2027E

2028E

Sales (£M)

3,320.4

2,380.2

2,782.8

3,140.0

3,101.8

Profit Before Tax (£M)

226.1

303.6

300.1

273.2

321.1

Diluted EPS (p)

134.2

187.6

185.5

177.6

217.3

…