Analysts at Deutsche Bank raised their target price on speciality chemicals and sustainable technologies company Johnson Matthey from 2,000.0p to 2,300.0p on Monday, stating the group was in the process of starting its “cultural change” journey.
Deutsche Bank said Johnson Matthey had issued stronger-than-expected first-half results, despite underlying earnings still being down 24% year-on-year, and its full-year 2022-23 outlook implying downgrades to consensus, as the analysts highlighted that the key issue was the strategic update from the group’s new chief executive.
DB said “cultural change” was clearly the focus, with cost savings, more attention on capital allocation, and better communication of the growth drivers of Johnson Matthey taking centre stage.
“While we welcome this shift in focus from management, we note that “cultural change” stories take time. This company is only at the start of this journey and is also heading into a likely softer macro environment suggesting that risks remain to consensus forecasts,” said DB.
“Post these results, we have modestly lowered EPS forecasts but have increased our target price to 2300p due to updated DCF assumptions. The stock does offer deep value (at 11.2x 2022/23E P/E and 7.2x 2022/23E EV/EBITDA) but with a lack of overall visibility on the long-term growth profile of the group we keep the name at ‘hold’.”
Reporting by Iain Gilbert at Sharecast.com
