Now could be the time to load up on Breville Group Ltd (ASX: BRG) shares.
That's the view of analysts at Macquarie Group Ltd (ASX: MQG), which believe the ASX 200 share could be dirt cheap at current levels.
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What is the broker saying about this ASX 200 share?
The team at Macquarie has been looking at industry data and believes that it is supportive of its view that Breville can deliver double-digit revenue growth through to FY 2027. Particularly given its historical outperformance of industry numbers thanks partly to its coffee operations. The broker explains:
1Q-CY25 Macquarie Kitchen Benchmark revenue was +0.1% yoy and 'De'Longhi Revenue Index' growth was +14.4%. BRG has outperformed Benchmark revenue growth by ~11% pa over CY18-24. Outperformance has been driven by coffee, NPD and new market entry. De'longhi's growth, and Breville's historical outperformance of the Benchmark, supports our forecast for double-digit BRG revenue growth FY25-27E.
However, it is not all sunshine and rainbows for Breville right now. Macquarie highlights that trade tariffs are making it an uncertain environment for appliance manufacturers. It adds:
The changing tariff landscape continues to cause volatility and uncertainty for both retailers and manufacturers in the small domestic appliances (SDA) market.
We have increased COS and CODB assumptions in FY25-26E to reflect the operating environment. This results in a ~2.5% cut to EPS forecasts. There are no changes to forecasts beyond FY26E. Our revenue forecasts are unchanged.
Big upside potential
Although the broker has trimmed its valuation to reflect the reduced earnings estimates, it still sees potential for some big returns over the next 12 months.
According to the note, Macquarie has reaffirmed its outperform rating on the ASX 200 share with a new price target of $40.20. Based on Breville's current share price of $29.92, this implies potential upside of 34% for investors between now and this time next year.
In addition, the broker is forecasting partially franked dividend yields of 1.2% in FY 2025, 1.4% in FY 2026, and then 1.6% in FY 2027.
This stretches the total potential return on offer here to over 35%. To put that into context, a $10,000 investment would be worth approximately $13,500 in 12 months if Macquarie is on the money with its recommendation.
Commenting on its buy recommendation, the broker concludes:
Outperform. The coffee segment, new market development and investment in new product development (NPD) continue to drive outperformance vs sector peers.
