Broker tips: Strix, Trifast, Zotefoams, JD Sports
By Iain Gilbert
Date: Wednesday 27 Aug 2025
(Sharecast News) - Analysts at Berenberg initiated coverage on a number of UK capital goods and industrial engineering firms on Wednesday, noting that UK industrials have underperformed the market 11.8% year-to-date, with macroeconomic uncertainty and tariffs not helping matters.
Berenberg said it was looking for equity stories where stock-specific factors can support better investor returns, leading it to launch coverage of three stocks where there has been a change in recent periods that could provide inflexion points to both the businesses and their respective share price.
Berenberg started Strix with a 'buy' rating and a 90p target price, arguing that the market was undervaluing the group's resilient fundamentals and cash-generative profile. It said Strix trades at just a 5.9x FY25 price-to-earnings ratio - despite sector-leading underlying margins of 18% and near-100% cash conversion. It also believes investors have been overly focused on transitory headwinds, including the slowing performance of its Billi acquisition, stagnation in its controls division, and a legacy debt pile.
The German bank also sees scope for buybacks given the depressed share price, but notes that management's track record in acquisitions supports a longer-term growth strategy. With a forecast free cash flow yield of 16.9% in FY26, Berenberg considers Strix a compelling re-entry point for investors.
Berenberg also picked up coverage of Trifast with a 'buy' rating and a 130p price target, with the analysts highlighting the company's multi-year turnaround under new management and stating that it sees further upside from operational improvements and self-help initiatives, while Zotefoams was started at 'buy' with a 540p price target, citing a strategic pivot under new chief executive Ronan Cox and a materially undervalued growth opportunity.
JD Sports' update this week revealed that underlying sales continued to struggle in the second quarter, but Shore Capital maintained a 'buy' rating on the stock, citing a "depressed" valuation.
Total revenues at the sports apparel and footwear retailer grew 2.2% in the second quarter, helped by continued store rollouts and conversions/relocations. However, like-for-like sales were down 3%, with LFL sales in Europe, the UK and North America down 0.4%, 6.1% and 2.3% respectively.
Nevertheless, Shore Capital highlighted that weakness across the UK and Europe was mainly due to tough comparatives with last year, which had a boost from the Euros football championship. Meanwhile, the decline in North America was an improvement from the 5.5% drop in the first quarter.
While the company guided to adjusted profit before tax in line with the consensus range of £852m-915m, Shore Capital noted that consensus forecasts have fallen by around £25m since the last update.
However, the broker added: "Despite this expected drop in profits (from £923m LY) the business remains highly profitable and cash generative, with the latter reflected in the newly announced £100m share buyback. This buyback brings the total for the year to £200m, c4% of market cap."
The stock currently trades at just 7.2 times forward earnings, which "continues to look depressed versus the retail sector", Shore Capital said.
"Thus, despite the challenges clearly present in this latest trading statement we continue to have a positive view on the shares. The strength of the brand, combined with the strong margins and good cash generation feed into positive medium-term prospects for the company, however, in our view, investors await signs of LFL recovery before the business will merit a re-rating."
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