LONDON (ShareCast) - (Sharecast News) - Analysts at Canaccord Genuity stood by their 'buy' rating and raised their target price on kettle safety controls manufacturer Strix Group from 265.0p to 310.0p on Monday, stating that growth was "coming to the boil".
Canaccord said Strix had reported a "resilient" and "in line" set of full-year numbers last week, something it said had demonstrated a "strong cash performance" amid a "challenging" first half, with gross margins increasing 50 basis points to 41.4% and earnings before interest, tax, depreciation and amortisation margins up 190 basis points to 40%, reflecting mix, production efficiencies and strategic initiatives.

As a result, Strix said it was confident of its outlook and talked of a strong second-quarter order book.

"Overall, with Strix expecting the Kettle Controls business to return to pre-COVID-19 levels, we forecast top-line growth of 26.4% (FY21E) with 10.4%/9.8% organic growth flowing through FY22E/23E," said Canaccord. "While we expect absolute profits to increase, margin will fall (as guided) due to the dilutive effect of Water & Appliance which trade on around 20% gross margin."

Although the Canadian bank acknowledged that Strix's share price had "performed strongly year-to-date", up 24% since 1 January, it still sees potential for a further 14% upside based on peer multiple analysis.

"At our new target, Strix would trade on a FY21E PE of 21x falling to 20x FY22E versus the 26x/23x (FY21E/22E) average of our industrial peer group, while the dividend yield is 2.6%/2.6% respectively. With sector leading margins, despite the dilutive forward mix, we expect the stock will likely continue to re-rate as it delivers against its double-digit organic growth roadmap."

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