Berenberg highlights rising sales and profit margins at TT Electronics

Berenberg sounded an upbeat note on TT Electronics, pointing to its solid sales growth as evidence that the company's shift towards secular growth markets over the preceding years was now bearing fruit.

"Most encouraging" was that expected 2021 sales were no fully covered by the order book, together with "good visibility" of 25.0-30.0% on 2021.

"As a result, it is perhaps unsurprising that TT’s management team noted that the business opportunity pipeline is as buoyant as they have ever seen it."

They also argued that the company's margins were also trending towards record highs of 10.0%-plus alongside and free cash generation was posied to inflect.

One-off start up costs for Virolens had subtracted 130 basis points from TT's operating margins for the first half of 2021, they added.

Self-help savings of £3.0m were also still to be had and some price increases had still to go through in the second half.

That was on top of the benefits that were yet to come of the company's increased operational gearing.

Berenberg also pointed out that its free cash flow estimates could prove "conservative" if a buyout of TT's fully-funded pensions materialised in the next couple of year.

The analysts also raised their target price on the shares from 290.0p to 320.0p.