DAVY VIEW

As its interim results demonstrated, Grafton has dealt impressively with the challenges posed by COVID-19. However, the share price has lagged recently and is little changed since we took the tactical decision to reduce our rating to ‘Neutral’ in May. However, the velocity of the recovery in the business has far exceeded expectations in the meantime; our 2021 EPS estimate is 18% higher than where it was in May. This leaves Grafton back at a level we consider attractive. Accordingly, we are restoring our ‘Outperform’ rating. Near-term prospects are supported by exposure to ‘hot’ areas (DIY in Ireland, housing activity in the UK), although we recognise there is risk from events (the pandemic, Brexit) over which Grafton has little control.