Exane upgrades Spectris, downgrades IMI
Exane BNP Paribas upgraded Spectris but downgraded IMI on Tuesday as it took a look at the UK capital goods sector.
Electronic & Electrical Equipment
9,581.00
17:14 18/04/24
FTSE 250
19,450.67
17:14 18/04/24
FTSE 350
4,334.00
17:14 18/04/24
FTSE All-Share
4,290.02
16:54 18/04/24
IMI
1,740.00p
17:15 18/04/24
Industrial Engineering
13,682.71
17:14 18/04/24
Spectris
3,166.00p
16:40 18/04/24
Spectris was lifted to 'outperform' from 'neutral', with the target price bumped up to 2,700p from 2,550p as Exane said recent weakness was overdone. "Spectris’ end markets have grown, but the shares have continued to underperform," it said.
Exane noted that Spectris has underperformed the UK industrials sector over the past six months, mainly due to a sector relative de-rating on worries around an EU short-cycle growth deceleration and an underwhelming first-half trading performance.
In addition, the bank said superior return on capital employed and growth outlook at the Materials Analysis segment is underappreciated.
"At the same time, Spectris screens as an attractive takeout candidate for private equity, acting as a free option for SXS shareholders."
Exane cut IMI to 'underperform' from 'neutral' and reduced the target price to 1,000 from 1,150p, highlighting structural issues at all three of its divisions, which it said will limit IMI’s ability to grow with the sector.
It said Critical Engineering has significant exposure to fossil power markets, Precision Engineering lacks the scale to be truly competitive and Hydronic Engineering has struggled to grow for years.
"We worry that IMI could attempt to resolve its lack of organic growth through acquisitions. The risk from capital allocation is rising," Exane said.
At 1440 BST, Spectris shares were down 0.4% to 2,381p and IMI shares were down 2.3% to 1,112.50p.