Analysts at Berenberg lowered their target price on chemicals company Johnson Matthey from 2,550.0p to 2,200.0p on Tuesday, citing higher discount rates and the wider de-rating of equity markets since its last update in May.
Berenberg noted there were several theories on the prerequisites for successful corporate reinvention but stated that good outcomes were rare – with a company that has experienced stalled growth for structural reasons having a less than 10% chance of a full recovery.
“The rare successes, in our view, have three qualities: time, money, and a clear-eyed understanding of their own strengths and limitations when targeting new markets,” said the analysts.
“We think that Johnson Matthey still has the luxury of the first two, even if last year’s setback in battery materials has left less than it would have liked.”
The German bank also highlighted that its mid-September sales briefing with new chief executive Liam Condon left it with the impression that the company may be in the process of acquiring the third.
With that said, Berenberg also acknowledged that the near-term reduction of roughly 10% to its 2022 earnings per share estimates comes as a result of lower automotive production assumptions, lower PGM prices and higher energy costs, with JMAT spending approximately £85.0m on energy in its most recent fiscal year.
Analysts at Citi upgraded their rating on testing laboratories company Intertek to ‘buy’ on Tuesday, citing further conviction in the firm’s resources margin outlook.
Citi stated that Intertek’s trade and resources was unit was “underappreciated, with its new rating on the stock being based on a view that consensus does not fully factor in operational leverage on any recovery within the trade division – or the potential for the group to benefit further from increasing energy capex than the market expects.
“Today, we highlight (i) further conviction in the margin and growth outlook within the resources division; and (ii) the regulatory and innovation backdrop remains solid for products, especially given easy 2023E comps,” said Citi.
“We raise our FY23E EBITA forecast 3% to £635.0m, with FX a further tailwind. This is 10% above Visible Alpha consensus.”
Reporting by Iain Gilbert at Sharecast.com
