Berenberg raises target price on Johnson Matthey

Analysts at Berenberg raised their target price on diversified chemicals group Johnson Matthey from 3,700.0p to 3,800.0p on Friday, stating the group was in the throes of a “metamorphosis”.
Berenberg pondered if in ten years time when MBA students come to study examples of businesses successfully responding to technological disruption – would Johnson Matthey make the list?

The German bank stated the received wisdom was “clearly no”, otherwise shares would not be “so cheap”, and noted that an “ill-tempered stock price reaction” to last month’s 2021 results “for no apparent reason other than higher capex” without a “near-term game-changer to show for it”, underlined this scepticism.

“Yet the drift of JMAT’s shares into an at times lazy consensus of managed decline is increasingly at odds with its rapid advances in hydrogen and progress towards commercialisation of high-end battery materials,” said the analysts.

Berenberg, which reiterated its ‘buy’ rating on the stock, highlighted that within the next four years, Johnson Matthey “could” be generating “well over” £200.0m in annual sales of its fuel cells alone, not far from market leader Ballard, a company worth around 60% JMAT’s market cap.

The analysts added that the increases to its forecasts primarily reflected the impact of higher platinum group metal prices on the efficient natural resources segment, along with a faster near-term recovery in autocatalysts.

“The difference between the company’s valuation and our own, higher, assessment is a matter of removing the market’s room for disbelief with respect to growth projects. Record levels of investment in battery materials combined with breakneck growth in hydrogen suggest this room is narrowing. Perhaps not MBA case study number one, then, but shares could easily make it into the course textbook.”

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