Metcash's (ASX:MTS) hardware division can benefit from housing recovery in the first half of fiscal year 2026, which has been slower than expected, limiting near-term upside, said Jefferies in a Friday note.

The investment firm forecasts Independent Hardware Group earnings before interest and tax (EBIT) of AU$62.9 million, up 19.5% year-on-year, for the first half of fiscal year 2026. Jefferies expects Total Tools' EBIT of AU$40.4 million, which is 2.2% lower year-on-year, for the same period.

The food business has become more difficult as the major supermarket chains increase their focus on value, and tobacco continues to weigh on store traffic, the note added. However, the risk of a major price war has eased after some improvement from Woolworths (ASX:WOW), added Jefferies.

Jefferies kept a buy rating on Metcash with a price target of AU$4.50.

The company's shares rose 2% in recent Monday trade.