Admiral: Stock Cheapest Since March 2020 Even As U.K. Motor Cycle Turns

(Preview) Company Update (ADM LN) (Buy)

Summary

• Admiral shares have fallen 43% from their peak to their lowest since March 2020, with a 14.1x P/E and a 6.7% Dividend Yield.

• The pricing cycle in U.K. motor insurance has started to turn, albeit unevenly and with price increases lagging claim cost inflation.

• We expect price increases to accelerate and benefit Admiral. In the meantime, competitors have flat or declining market shares.

• Earnings should be resilient against recessions and inflation, and higher interest rates will benefit Admiral's Investment Income.

• With shares at 2,103p, we expect an exit price of 3,544p and a total return of 97% (23.0% annualised) by 2025 year-end. Buy.

Introduction

We revisit our Admiral Group PLC investment case after shares fell to their lowest level since March 2020.

Admiral’s share price has now fallen by 43.3% since their peak in August 2021. Compared to October 2020, when we upgraded our rating to Buy, shares have lost 10.5% (in GBP and after dividends).

We believe sector developments have been po…