Ashtead Group PLC (LON:AHT) got a lift on Wednesday as Berenberg upgraded its rating for the construction equipment services group to ‘hold’ from ‘sell’.

The German investment bank also raised its target price for the FTSE 100-listed firm to 2,850p from 2,150p, albeit with the stock currently changing hands at 3,189p, up 0.6% on Tuesday’s close..

READ: Ashtead reports record quarterly cash flow despite plunging profits

In a note to clients, Beenberg’s analysts said: “Our call for Ashtead’s profitability to surprise to the downside as rental rates came under pressure has so far proven incorrect. The shares have been impervious to bad news and Ashtead’s shares have enjoyed one of the sharpest re-ratings of any stock in the support services sector.”

They added: “Such a re-rating leaves the valuation full, but with rental rates having proven relatively resilient thus far, and equipment end-market pricing now beginning to strengthen, we see little reason for the stock to crack now. Instead, we think the coming quarter is likely to surprise to the upside.”

At the start of September, Ashtead revealed that profits in its first quarter fell by over a third amid the coronavirus pandemic but it generated record levels of free cash flow.

Revenue in the three months to July 31, 2020, was £1.2bn, down 6% compared to a year ago. Profit before tax dropped 38% to £192mln, with underling profit margins of 45.6% compared to 44.2% in the second half of last year.

After reporting record cash flow of £447mln in what was the first quarter of its financial year, the group expects this to top £1bn for the full year. Ashtead’s management expects full-year rental revenue to fall by “mid to high single digits”, excluding currency swings.

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