JP Morgan has downgraded its revenue forecasts for The Restaurant Group (TRG) as the likelihood of significant restrictions continuing past the first quarter of this year increase; but it remained positive about the group’s expansion prospects, particular through Wagamama.

Since its last update in December, the analyst has reduced the group’s estimated revenue for the 2021 financial year to £578m, down from £603m, while adjusted EBITDA for 2020 is now estimated to come in at around £8m, compared to the previous forecast of £15m and estimates for 2021 put it at £31m, down from £60m. It has also amended its target share price from 104 pence per share to 95 pence per share.

The changes have been made due to a number of factors, including lower than anticipated revenue and higher costs associated with full lockdown vs. previous tiered restrictions.

The analyst said it had updated its model for TRG given that “a phased easing of lockdown (possibly from March) is, in our view, unlikely to start with pubs and restaurants”.

It said that although the group had already highlighted that the first quarter of 2021 would be “extremely challenging”, an environment with a high level of restrictions is likely to last beyond that trading period.

Despite the downgrading of revenue forecasts for the year ahead, the analyst said its investment thesis remained positive and that it continued to believe the group capable of delivering annualised EBITDA of £110-125m if its retained estate were to achieve 2019 sales levels.

The note said that it believed Wagamama still provided TRG with a significant long-term avenue for expansion through the rollout of further sites, the growth of national delivery capability and increased penetration of the airport concessions space.

“There may also be optionality around international expansion for both Concessions and Wagamama. The aggressive restructuring of Leisure is removing this division as a headwind and diminishing its drag on LFL growth and profitability,” it added.