Wesfarmers' (ASX:WES) Bunnings, the company's home improvement and lifestyle retail unit, has an "underestimated" growth outlook, that can do even better, according to a Thursday report by The Australian, citing investing and financial firm UBS.
The company reported that Bunning had a lower sales growth in the fiscal first half, compared to the second half of fiscal year 2024.
UBS Analyst Shaun Cousins believes that Bunnings is set to expand its market share and enter new categories, outpacing supermarkets while boosting its online sales and growing its commercial customer base.
The retailer accounted for 56% of Wesfarmers' pre-tax earnings and generated a 69% return on capital in FY24, significantly outperforming the group's 34% return.
While Bunnings' sales growth has slowed to low single digits since its COVID-era boom, Cousins pointed out that its global peers have experienced declines.
UBS upgraded Wesfarmers' rating to neutral from sell and raised its price target to AU$76.
Shares of the company rose past 3% in recent Thursday trade.
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