(Sharecast News) – UBS upgraded Spirax-Sarco Engineering on Friday to ‘buy’ from ‘neutral’ and lifted the price target to 12,400p from 11,560p, citing an attractive entry point.
“We now see the shares as presenting an attractive entry point, having de-risked our FY23e estimates and updated our views on the drivers of growth ahead of IP from next year,” it said.
“We note near-term risk/reward is now better balanced, following share price weakness in Q2 (-15% underperformance versus defensive peer Halma).”
UBS added that while consensus has been coming down recently, the shares are not reacting to downgrades.
It said the stock’s valuation is as attractive now as it was at the Covid trough in March 2020 on an EV/ EBIT basis.
“On a price-to-earnings basis shares are near the 15-year average, representing even better value, for a group that can grow revenues organically at mid single digit+ through cycle (outperforming trade-weighted IP by 4x on our analysis) maintaining sector-leading margins and compounding earnings growth at double-digits (12% compound annual growth rate in our model).”
Elsewhere, Barclays initiated coverage of Morgan Advanced Materials with an ‘overweight’ rating and 365p price target.
“We think improving end-market exposure will drive higher through-cycle growth for MGAM, with the group EBITA margin expanding to mid-teens and a new peak,” it said.
The bank noted that focused M&A is on the agenda, but said it also sees scope for a supportive capital return, while longer term further portfolio rationalisation could drive multiple expansion.
