Market share gains drive strong sales growth in H1

Continued and sizeable market share gains drove a 15.1% increase in first half sales for Marks Electrical Group (MRK), particularly impressive in a market that was contracting overall. The company made gains in both Major Domestic Appliances (MDAs) and Consumer Electronics (CE), despite both categories being weak for online business in the period. Moreover, the MRK cash position remains strong, outperforming expectations.

These inherent business qualities are not captured in the current share price, in our view, and we reiterate a 150p fair value. MRK is not only comfortably delivering double-digit sales growth but also enjoys significant geographic and category headroom for further expansion. In addition, it operates on a cash positive basis which implies scope for incremental dividend growth as earnings advance. We base our fair value on 1.7x FY2023 sales revenue and 21.5x FY2023 EV/EBITDA.