Broker tips: Croda International, Hill & Smith, MusicMagpie
Goldman Sachs upgraded its stance on shares of Croda International to ‘buy’ from ‘sell’ and hiked its price target to 8,000p from 5,750p as it said the risk/reward was "positively skewed".
The bank lifted its FY21/22 estimate for adjusted EBIT by 7%/11% on its "more optimistic" outlook in Consumer Care (CC) and Life Sciences (LS), where it sees a confluence of tailwinds in cosmetics and skincare, Ag and patient health care accelerating growth.
Goldman also said it believes strength in the life sciences segment will be longer-dated than expected and there is additional potential applications in mRNA technology accelerating after the pandemic.
In addition, GS said Croda has an undemanding valuation. It noted that Croda has underperformed EU consumer peers by 3% year-to-date despite 5% consensus EBITDA upgrades versus peers.
Analysts at Berenberg hiked their target price on sustainable infrastructure and safe transport products developer Hill & Smith from 1,565.0p to 1,775.0p on Wednesday, citing some "improved messaging".
Berenberg said the next leg of growth was "well underway" at Hill & Smith, with stronger sales growth, higher margins, better portfolio management, and improved messaging all on the agenda.
The German bank stated there were "glimpses of all four elements" in Hill & Smith's Tuesday trading update, with January-April sales growth up 10% year-on-year, while the closing of the group's loss-making variable messaging sign business marking another standout positive.
"Yet there has also been a notable and positive change in the group's messaging over the past few months," said Berenberg, which also reiterated its 'buy' rating on the stock.
"With shares still undemanding – at 18.5x 2022 P/E for a 4.3% FCF yield – we remain hugely optimistic about the opportunity ahead."
Peel Hunt and Shore Capital were upbeat about MusicMagpie's prospects as the brokers started coverage of the gadget recycler after its listing.
Peel Hunt advised investors to 'buy' the shares and set a price target of 233p. Analyst James Lockyer said the market was expanding by 15% a year to 2024 - faster than equipment makers such as Apple and with better green credentials.
"Its strong brand trust is both a differentiator and the moat [against competition]," Lockyer wrote in a note to clients.
Shore, the company's house broker, said MusicMagpie had environmental credentials, a proprietary technology platform and a growing list of alliances, including with Apple. The broker predicted a three-year compound annual growth rate of 19.8% with earnings per share building and a debt-free balance sheet.
"After a period of considerable development and investment, we forecast strong ongoing financial returns," analyst Clive Black wrote in a note to clients. "Overall, we see MusicMagpie as having very high barriers to entry, as a result of its key people, business model, markets, ESG credentials, technology platform and financial prospects."