Berenberg lowers Ultra Electronics to 'hold', raises target
Analysts at Berenberg lowered defence and security firm Ultra Electronics' shares from 'buy' to 'hold' on Monday but upped their target price from 1,750p to 2,200p, noting its shares had had a "phenomenal run of late".
Aerospace and Defence
10,725.69
13:40 26/04/24
FTSE 250
19,827.13
13:39 26/04/24
FTSE 350
4,465.39
13:40 26/04/24
FTSE All-Share
4,418.73
13:40 26/04/24
Ultra Electronics Holdings
3,500.00p
17:09 29/07/22
With Ultra's shares rising 64% so far in 2019, Berenberg credited its strong performance to positive sentiment momentum and improving fundamentals, including prospects for higher organic growth, a strong order intake and a "group-wide business improvement strategy" under new chief executive Simon Pryce.
The German broker said Ultra's interim 2019 results had "certainly" lived up to its expectations, with 8.0% organic revenue growth, a decade-high order book of £1.0bn, and Pryce's improvement initiatives "tracking to plan".
However, Berenberg said Ultra's shares were now trading on a 2020 price-to-earnings ratio of 18x - or at a 20% premium to the pan-European defence sector's average and a 30% premium to the company's own 10-year average of 13x.
"While we feel this is justified given the improved outlook, we believe a fair amount of upside is now priced in, and expect the shares to pause for breath in the near term," said Berenberg.
"As such, we move to a 'hold' recommendation with a new price target of 2,200p (2% upside). We would use any pullback in the shares as a buying opportunity."