Berenberg raises target price on Victrex

Analysts at Berenberg raised their target price on specialty chemicals firm Victrex from 2,100.0p to 2,500.0p on Tuesday, highlighting a first-half cyclical rebound and the potential for secular growth.

Berenberg stated that when Victrex's earnings had not "behaved like those of a through-the-cycle compounder" in the past, the group's valuation had "generally implied confidence in a return to form".

The German bank noted that Victrex's first-half results gave "a good indication" of the reason why, with solid volume growth against a backdrop of a "more benign" industrial cycle driving a roughly 10% beat on pre-tax profits.

However, Berenberg said the problem with turning positive now was that the roughly 7% move in the share price on results day suggested that potential upside to 2021 numbers was "well understood".

"We suspect that the market's patience may also be tested by a year of flattish earnings owing to FX headwinds in 2022," said Berenberg.

"The increase in our price target reflects better working capital management and rollover of our DCF. Shares trade on 30x 2021 P/E for a 9% EPS CAGR and should, in our view, remain supported around these levels by the prospect of special dividends from 2022."