Broker tips: Johnson Matthey, Aston Martin, Victrex

by | Jul 17, 2023

(Sharecast News) – Deutsche Bank upgraded Johnson Matthey on Monday to ‘buy’ from ‘hold’ and lifted the price target to 2,500p from 2,300p.
The bank said it sees upside potential from a) a successful pivot or b) a break-up.

“Johnson Matthey is largely perceived as an autocatalyst business with an end date,” DB said.

It argued that this overlooks large opportunities for the company. “1) We believe that management change is likely to unlock significant value. Ultimately, the situation can be win-win: if the growth/reinvention plan fails a value up to £35/share could be realised in a blue sky breakup scenario.

“2) There is still substantial continued value in the autocatalyst business. 3) Though we expect earnings declines this year in PGM services, the segment is well positioned to benefit from growing demand for recycled materials.

“4)There is significant unrecognised potential in catalysts & hydrogen which can drive growth/reinvention.”

Deutsche noted that JMAT trades at 6.8x EV/EBITDA and said this looks too low given the options.

Analysts at Barclays reiterated their ‘overweight’ stance and hiked their target price for shares of Aston Martin Lagonda ahead of the carmaker’s next set of results on 26 July.

Most importantly, following the company’s Capital Markets Day and the recently announced deals with Geely and Lucid, they viewed Aston as more “derisked” and said that its potential had been “validated”.

They expected Aston’s second quarter earnings before interest, taxes, depreciation and amortisation to come in at £41m.

That would be in line or slightly ahead of the company’s own guidance. They also anticipated a “much higher” outcome in the back half of the year.

The target price was raised from 300p to 375p.

Berenberg upgraded Victrex to ‘buy’ from ‘hold’ and lifted the price target to 2,090p from 1,750p, as it argued the current risk/reward is attractive.

It noted that Victrex’s recent profit warning spooked the market, sending the company’s share price to a seven-year low.

“We believe that this represented a clearing event and earnings should now be reaching their trough this fiscal year,” Berenberg said.

It added that the drop seen in volumes in the third quarter sets FY23 volumes near to the level achieved in FY20.

Berenberg said: “In our view, investors should buy the stock as: i) consensus estimates are now properly rebased; ii) Victrex has been slower than expected to implement pricing initiatives, but these have recently started to come through and are here to stay – partly offsetting the negative mix coming from the rebound in VAR and new business in China; and iii) free cash flow is inflecting next year as the capex cycle comes to an end and the build-up in inventories is going to unwind.”

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