By Michele Maatouk
Date: Monday 20 Feb 2023
LONDON (ShareCast) - (Sharecast News) - Berenberg downgraded Spectris on Monday as it took a look at capital goods and industrial engineering stocks.
Spectris was cut to 'hold' from 'buy' and the target price reduced to 3,470p from 3,835p.
Out of Oxford Instruments, Halma and Spectris, Berenberg said the latter is the one with the largest divergence in possible outcomes over the next 12 months by far.
"Our blue-sky scenario implies annual returns of 16-17% over the next five years," it said.
"However, with significant M&A execution risk (both acquisitions and disposals) necessary to reach this point, as well as greater potential for both end-market and margin weakness in 2023, we take a cautious view at this time and downgrade Spectris to hold."
Berenberg kept Oxford Instruments at 'buy' and hiked the price target to 2,930p from 2,500p. It said the risk/reward was the "cleanest" at 'top pick' OI.
"We believe OI's consensus earnings per share forecasts for FY23 and FY24 offer the clearest upside in the sector, and we expect a 5%+ beat to FY March 2023 forecasts," the bank said.
"With a strong net cash position (0.9x EBITDA), the downside protection that comes from Spectris's prior bid and our conviction about several medium-term growth opportunities, we view OI's risk/reward as comfortably skewed to the upside."
Berenberg kept Halma at 'hold' but lifted the price target to 2,295p from 2,260p.
"Halma is the highest-quality company in the sector, with a world-class management team and a strategy that has driven long-term outperformance that we expect to continue," it said.
"While an unoriginal thesis, we point to the sell-side dilemma that exists on the name - if we do not believe that the company will re-rate over the next 12 months and earnings growth will be circa 10-14%, then it is impossible to argue for the 15% upside necessary to justify a buy rating. Hence, we remain holders, with more downside than upside to the current multiple."
At 1450 GMT, Spectris shares were down 3.2% at 3,132p.
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