Admiral: 6% Fall After Citi Downgrade is Another Opportunity

Company Update (ADM LN) (Buy)

Highlights

• Shares are at 14.8x 2019 EPS and 40% down from peak

• 2022 inflation may hit near-term profitability, likely moderately

• Price hikes since 2022 mean long-term margins are secure

• 2023 year-to-date datapoints show positive sector trends

• At 2,189p, we see 54% upside (20.7% p.a.) by end of 2025. Buy

Introduction

We review our Admiral investment case after a Citi downgrade this morning (June 13) caused the share price to fall significantly. As of 12:50 in London, shares are down 6% for the day, having reached a new 52-week high last week (June 6) as part of a sustained recovery since troughing in July 2022. The share price remains around 40% lower than its all-time high in August 2021.

We believe Admiral shares are highly attractive. They are at 17.7x 2022 EPS, though the year was impacted by elevated inflation and U.K. Motor policies written last year are currently around breakeven. More meaningfully, shares are at 14.8x 2019 EPS, despite the company now insuring 13% more vehicles in the …