Broker tips: Rotork, Man Group, Ashtead Technology

Analysts at RBC Capital Markets downgraded industrial valve manufacturer Rotork from 'outperform' to 'sector perform' on Monday, citing "reduced upside".

RBC Capital said it had upgraded Rotork to 'outperform' in March 2022, reflecting "a more favourable" outlook as nearly half of its sales were into oil and gas.

The Canadian bank highlighted that while supply chain impacts had held back growth, the order has continued to grow, and Rotork had seen an acceleration in second-half revenues.

"The positive fundamental case is unchanged in our view, and we expect this to continue to develop in 2023," said RBC.

However, the analysts stated that with the share outperforming its group by roughly 10% over the past 10 months, they see the relative upside as now being "somewhat more limited".

"Our price target for Rotork is set at 340.0p and this supports our 'sector perform' rating. We continue to use enterprise value/sales for our valuation base case and assume a target of 4.0x in line with the post-financial-crisis average level," said RBC.

Analysts at Jefferies upgraded investment manager Man Group from 'hold' to 'buy' on Monday as it took a fresh look at the UK sector.

Jefferies said Man Group's shares offered "cheap downside protection" should the current "more constructive market backdrop" start to unravel.

Whilst net flows will have deteriorated in the second half, due to LDI and rebalancing activity, Jefferies stated that gross inflows had "remained strong"

"Extraordinary capital returns should remain an attractive recurring feature of the equity story," said the analysts, who stood by their 285.0p target price on the stock.

Analysts at Canaccord Genuity raised their target price on underwater technologies and support services group Ashtead Technology from 375.0p to 400.0p on Monday following the firm's "strong close" to 2022.

Canaccord Genuity's heightened target price comes after Ashtead Technology announced full-year revenues were likely to be £72.5m, with margins to be ahead of market consensus, and an already-strong first-half performance.

The Canadian bank said trading was good in the fourth quarter, in both oil and gas and offshore wind, and noted that strong volume meant that there had been less of the traditional "winter price softness" than normal.

"We note that despite the acquisitions made in 2022, Ashtead Technology will close the year with greater debt facilities than it started, thanks to the additional arrangements put in following the acquisition of Hiretech; on our new forecasts we estimate the group will average 0.9x net debt/EBITDA through 2023E, which we continue to regard as conservative," said Canaccord, which reiterated its 'buy' rating on the stock.

"We are making minor adjustments to our forecasts following the trading statement - we were already at the upper end of the consensus range - with the result that our EPS is lifted 10% for 2022E and 4% for 2023E and beyond."