Johnson Matthey forecasts for catalysts, electric batteries impresses analysts

After Johnson Matthey set out financial guidance at a capital markets day focused on growth opportunities ahead, analysts at Deutsche Bank and Credit Suisse were among those to hike their expectations for the chemicals group.

As well as highlighted its ability to grow earnings ahead of the market in the face of the changing nature of the global automotive industry, the announcement that caught investors and analysts' eye was a big investment in its battery material technology business and launch into battery cathode materials with a proprietary cathode material 'eLNO'.

"We acknowledge the earnings opportunity is still 4-5 years away. However, launching a viable cathode materials technology (potentially more cost efficient than NMC [nickel manganese cobalt], positive early feedback from customers) should improve investor sentiment towards JMAT," said Credit Suisse, ascribing zero value for this business in our valuation.

Credit Suisse increase its earnings forecasts by an average 1%, increase its target price to 3,700p and retain its 'outperform' rating.

Deutsche Bank, which reiterated its 'buy' with a target price of 3,600p, was impressed with management predictions that autocatalysts will grow for at least the next ten years driven by market share gains and growth in Asia, more than offsetting the decline in diesel market share in Europe and increasing electrification.

The new "market leading proprietary cathode material" and initial investments in capacity, "gives confidence in their positioning and potential in this fast growing market".