Barclays downgrades Chemring on relative valuation basis

By Michele Maatouk

Barclays downgraded Chemring on Friday to ‘underweight’ from ‘equalweight’ on a relative valuation basis and cut the price target to 336p from 360p.
The bank noted that Chemring trades at a 15% premium to Bloomberg-consensus EU defence peers on EV/EBIT, and at a discount of only around 15% to prior peak (2018) EV/EBIT and price-to-earnings multiples at 13.5x/14.2x respectively.

“In the near-term, we believe the premium afforded to Cyber Security exposure (Roke Manor) is fully priced in, and with rising cost input headwinds (energy), and Roke operating expenses supporting expansion, we see limited self0help opportunities as Chemring’s turnaround story is largely complete,” it said.

At 1010 BST, the shares were up 0.5% at 327.50p.

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