Broker tips: Serco, Mears, Victorian Plumbing
By Iain Gilbert
Date: Tuesday 13 Oct 2026
(Sharecast News) - Berenberg said Serco and Mears should be the next beneficiaries of renewed interest in the UK outsourcing sector, lifting its target prices on both stocks after the Mitie takeover highlighted what it sees as a clear valuation opportunity.
The broker raised its Serco price target from 350p to 400p, reiterating a 'buy' rating, and increased its Mears target from 565p to 600p, also keeping its stance on the stock at 'buy', as it argued that both companies combine resilient cash generation with attractive valuations and exposure to structural growth areas that continue to draw private‑equity interest.
Berenberg said investors should "look through" UK political noise around insourcing, noting that governments remain under pressure to deliver better services at lower cost. It expects any insourcing to be concentrated in travel, energy and water - areas where Serco and Mears have limited exposure. Instead, both groups have aligned themselves with public‑spend verticals expected to see sustained investment, including defence, compliance, immigration and justice, helping push bid pipelines to record levels.
The German bank highlighted strong free‑cash‑flow profiles across the sector, supported by capital‑light operating models and long‑term revenue visibility, stating both companies have scope to accelerate earnings per share growth through bolt‑on M&A activity and material buyback programmes.
On Serco, Berenberg said the market continues to underestimate the group's positioning, with defence now accounting for more than half of earnings and around 50% of profits coming from North America. A robust balance sheet, ongoing upgrades and a shift into higher‑margin growth areas leave Serco "entering a compounding growth period", it said.
For Mears, Berenberg pointed to a strengthening track record as its maintenance‑led division moves towards 70% of revenue by FY27. Following a successful re‑bid cycle, a large portion of future revenue has already been locked in, giving confidence in its 5% to 9% growth target and further upside as pipeline wins convert. It also said a strong balance sheet provides room for additional M&A and buybacks.
Analysts at Canaccord Genuity lifted their target price on Victorian Plumbing to 135p from 132p and reiterated their 'buy' stance on the back of a stronger‑than‑expected trading update.
Canaccord Genuity said FY26 revenue rose 11% to £344m, ahead of its £330m estimate, with adjusted pre-tax profits of around £22m and cash of £25m also beating forecasts.
Order volumes grew 13%, offset by a small drop in average order value, while the newer tiles and flooring division surged 76% to £31m and trade revenues rose 6% to £78m. Canaccord highlighted continued working‑capital strength and modest upgrades to its revenue and cash forecasts.
Crucially, it said Victorian Plumbing had maintained its growth rate despite deteriorating economic data and weaker industry trends, implying accelerating market‑share gains.
Growth initiatives also impressed, with tiles and flooring showing secular momentum and MFI revenue ramping up sharply in the second half as its product range nears completion. While Canaccord remains conservative on the relaunched MFI furniture and homewares unit, it acknowledged that early traction was encouraging.
With the shares trading on 13.8x FY27 earnings, the broker argued the valuation remains attractive given the group's growth profile, prompting the target price upgrade.
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