LONDON (ShareCast) - (Sharecast News) - Analysts at Berenberg initiated coverage on essential components and solutions provider Essentra at 'buy' on Tuesday, stating the firm was "more than the sum of its components".
Berenberg said Essentra provided "a textbook example" of a company selling businesses to focus on its strengths, with the firm currently making components and producing packaging for the medical industry, while also being the world's leading independent maker of cigarette filters.

The German bank, which hit the stock with a 360.0p price target, also highlighted that the company had already announced a strategic review of two of its three divisions by the second quarter of 2022, at the earliest, and could become a pure-play components business.

"This should act as a powerful catalyst, as Essentra makes its highest margins and returns in this area, where peers such as Electrocomponents trade on significantly higher multiples (12.3x 2022E EV/EBITDA)," said Berenberg.

"Our investment thesis depends upon the successful disposal of its packaging and filters businesses - after which we would expect its nimble components business to rerate in line with peers to a level of 11.0x EV/EBITDA. At current market prices, Essentra trades at 6.6x 2022E EV/EBITDA or 11.1x 2022E P/E. Our price target of 360.0p per share offers 40% upside."

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