Berkeley Group PLC (LON:BKG) has received a share price target upgrade from JP Morgan, which says worries about cladding and people leaving London are overplayed.

The US bank notes that Berkeley shares have underperformed the housebuilding sector by 21% year to date and its previous 50% premium has now been replaced by a slight discount.

Concerns have centred on cladding remediation and the impact of softer reservations on medium-term earnings due to ‘de-urbanisation’.

The broker though expects reservations to improve while migration from Hong Kong is likely to be ‘meaningful’ and boost profits by 4% annually.  

Results are due on 23 June when the builder’s attributes of a longest duration landbank, strong returns and surplus cash will come to the fore, JPM adds.

Numbers are likely to be considerably ahead of the peer group and the bottom-end of guidance, while a healthy balance sheet should underpin a firm commitment to capital returns going forward.

JP Morgan has upgraded to ‘overweight’ from ‘neutral’ with a price target 5,400p.

Shares rose 2.9% to 4,866p.

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