Jefferies initiates coverage of Melrose spinoff Dowlais at 'buy'
By Michele Maatouk
Date: Monday 05 Jun 2023
(Sharecast News) - Jefferies initiated coverage of Dowlais - which was spun off from Melrose Industries - on Monday with a 'buy' rating and 155p price target, offering upside of around 21%.
Dowlais comprises GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen, which sat under Melrose ownership since FY18, and were demerged in April.
"We see Dowlais as a high-quality auto supplier with attractive margin enhancement potential as the auto recovery comes, although we do not see it as overly dependent on volumes or cost recovery," Jefferies said.
"There is a strong management team in place that has led GKN Automotive through its improvement phase and as Dowlais transitions from the prior Melrose 'buy, improve, sell' umbrella to a standalone group, we see these businesses enhanced by a greater focus on long-term structural growth, without compromising on the pursuit of best-in-class profitability."
At 1025 BST, the shares were up 0.7% at 126.23p.
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