Broker tips: Smart Metering Systems, Volution Group

Analysts at Liberum upgraded Smart Metering Systems to 'buy' and raised their target price on the stock from 620.0p to 800.0p on Friday following the group's unscheduled trading update a day earlier.

Liberum said Smart Metering's trading update guided to smart meter installations at more than 80% of pre-Covid levels as the group's CaRe asset pipeline continued to develop, with the analysts taking "an increasingly optimistic view" of the programme, and added that the layering of battery storage assets would create "significant value" for the business.

The analysts also said that there were "encouraging developments" on SMS' Behind the Meter smart solar and storage assets, with the firm's ADM devices being trialled with water companies in Australia.

As a result, Liberum bumped Smart Metering up from 'hold' and increased its 2020 full-year underlying fully diluted earnings per share by 5% due to marginal gains across the board.

"We believe there is now enough positive news on the CaRe assets to assume that these will be a significant growth driver for SMS going forward and, whilst we have not included these assets in numbers yet, we believe the market should begin to price this in," said Liberum.

Analysts at Berenberg raised their target price on ventilation products supplier Volution Group from 315.0p to 345.0p on Friday, stating the company's "strategically attractive" acquisition of ClimaRad.

Berenberg said Volution's acquisition of ClimaRad, a manufacturer of decentralised heat recovery ventilation in the Netherlands, was not only immediately earnings-enhancing but also added to the firm's product portfolio, providing further cross-selling opportunities.

The German bank highlighted that the business was "well placed" to benefit from structural and regulatory tailwinds like the European Green Deal renovation wave, given that its products aid the decarbonisation of heating and cooling.

"Combined with supportive regulation, an increasing focus on indoor air quality and a strong balance sheet, Volution remains an ESG gem," said the analysts, who maintained their 'buy' rating on the stock.