Berenberg starts IMI at 'sell', highlights near-term headwinds
Berenberg initiated coverage of valve manufacturer IMI at 'sell' on Friday with an 875p price target, highlighting risks to near-term earnings.
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
IMI
1,729.00p
17:15 19/04/24
Industrial Engineering
13,663.38
17:10 19/04/24
While the change in management has injected some optimism into the story after several years of subdued performance, there are a number of risks.
Berenberg said it expects the precision division, which accounts for around 50% of IMI's revenue and earnings before interest and tax, to experience an accelerated decline in revenue due to its exposure to weak manufacturing PMIs and a heavy truck production cycle that it reckons is about to roll over.
Meanwhile, the critical division faces structural headwinds and the turnaround is likely to take longer than expected, it said, while the hydronic arm has not grown in a decade.
"While management has impressed by reacting early to the market weakness, our earnings per share forecasts are 3%/5% below consensus for FY 2019/2020," Berenberg said.
At 1450 BST, the shares were down 0.8% at 1,020p.