Berenberg lowers target price on Johnson Matthey
Analysts at Berenberg lowered their target price on chemicals company Johnson Matthey from 2,550.0p to 2,200.0p on Tuesday, citing higher discount rates and the wider de-rating of equity markets since its last update in May.
Berenberg noted there were several theories on the prerequisites for successful corporate reinvention but stated that good outcomes were rare – with a company that has experienced stalled growth for structural reasons having a less than 10% chance of a full recovery.
"The rare successes, in our view, have three qualities: time, money, and a clear-eyed understanding of their own strengths and limitations when targeting new markets," said the analysts.
"We think that Johnson Matthey still has the luxury of the first two, even if last year's setback in battery materials has left less than it would have liked."
The German bank also highlighted that its mid-September sales briefing with new chief executive Liam Condon left it with the impression that the company may be in the process of acquiring the third.
With that said, Berenberg also acknowledged that the near-term reduction of roughly 10% to its 2022 earnings per share estimates comes as a result of lower automotive production assumptions, lower
PGM prices and higher energy costs, with JMAT spending approximately £85.0m on energy in its most recent fiscal year.
"Our forecasts for 2024/25 benefit from cost savings, the impact of the weakening GBP and, to a lesser extent, the recently announced cancellation of planned rises in UK corporation tax. Shares trade on circa 10% 2024 FCF yield and a mere 10x P/E."
Reporting by Iain Gilbert at Sharecast.com