The team at Morgans has been busy reviewing recent updates this week.
Three ASX shares that it has given its verdict on are listed below. Here's what the broker is saying about them:
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Baby Bunting Group Ltd (ASX: BBN)
Morgans has been looking at this baby products retailer's trading update, which was in line with expectations.
As a result, it feels that its shares remain fully priced at current levels and has retained its trim rating (one notch above sell and one notch below hold) with a $2.70 price target. It explains:
BBN has provided a trading update which was broadly in line with expectations, with comp sales YTD up 2.2%. FY26 guidance was reiterated for pro forma NPAT of $17-20m. Earnings will be skewed to the 2H driven by stronger sales growth post store refurbishments and incremental margin improvement. The three newly refurbished stores continue to trade well, with an average 30% sales uplift YTD, in line with the 28% reported at the time of the FY result.
This is above the target range of 15-25%, however we still think it is early days. Whilst we acknowledge the significant leverage if the business can return to 10% EBITDA margins, we believe this relies on solid execution, and think this is reflected in current valuation. Given the share price strength, we retain our TRIM recommendation.
Rio Tinto Ltd (ASX: RIO)
This mining giant delivered a solid quarterly update this week. However, it notes that a very strong finish to the year will be needed to achieve its guidance. In light of this and its stretched valuation, the broker has downgraded Rio Tinto's shares to a trim rating with a $117.00 price target. It explains:
Operational delivery was again solid, but RIO is relying on a stellar 4Q just to achieve the low end of Pilbara shipments guidance. Copper again was the standout, driving group momentum and sentiment. Valuation starting to stretch moving beyond a positive TSR, prompting TRIM rating.
SRG Global Ltd (ASX: SRG)
Morgans is a fan of this engineering services company's acquisition of Total Ams and believes it will be significantly accretive to earnings. It also likes that it will improve diversification and provide exposure to the government's significant maritime defence spend. In response, Morgans has put an accumulate rating and $3.00 price target on its shares. It said:
The acquisition of TAMS on a cheap multiple is materially EPS accretive and is on strategy, improving diversification and increasing exposure to the government's significant maritime defence spend over the next decade. In our view, the added scale, diversity and strong forecast EPS growth over FY26 (+25%) and FY27 (+16%), should ensure the stock continues to re-rate. Moreover, the balance sheet remains conservative meaning SRG can continue to supplement organic growth with further acquisitions. Our target price rises to $3.00 from $2.10.
