Broker tips: ITM Power, Netcall, Greencore, InterContinental Hotels

JP Morgan Cazenove has initiated coverage of renewable energy specialist ITM Power with an 'overweight' rating.

The bank said the Aim-listed hydrogen electrolyser manufacturer was a leader in its field with "strong partnerships and growth", and was now well placed to benefit from a new 1GW manufacturing facility in Sheffield.

It said: "This new facility should help ITM significantly increased electrolyser output and lower unit costs. We expect ITM to turn earnings before interest, tax, depreciation and amortisation positive by the 2023 full year, and free cashflow positive by the 2025 full year, as plant utilisation improves and demand for green hydrogen solutions rapidly increases."

JP Morgan concluded: "With global hydrogen electrolyser shipments likely to grow significantly to 2030, we estimate 34% average upside based on our three macro scenarios."

Analysts at Canaccord Genuity raised their target price on software firm Netcall from 74.0p to 88.0p on Wednesday, stating it expects more good news to come following the group's "strong" first half.

Canaccord, which increased its adjusted earnings per share forecasts for Netcall by roughly 4% on the company's first-half trading statement earlier in February, now expects "a more permanent uplift" in adjusted underlying earnings margins, as the Intelligent Automation part of the group moves from a loss into profit.

The Canadian bank noted that Netcall's top line organic growth was 9% in the first half, a level it expects to remain steady in the 2021 and 2022 trading years, with the Liberty suite now over 95% of group and "other" legacy revenues below £1.0m per annum.

Canaccord, which also reiterated its 'buy' rating on the stock, upgraded 2021 and 2022 full-year adjusted underlying earnings estimates by roughly 11 and 13% and adjusted earnings per share by 12 and 16% to reflect higher group margins.

Greencore rallied on Wednesday as HSBC upped its stance on shares of the Irish convenience food maker to 'buy' from 'hold' and lifted the price target to 170.0p from 120.0p as it argued the roadmap out of lockdown underpins a recovery in the food to go business.

"While individuals will not be able to enjoy a meal indoors until 17 May, we see the upcoming spring months as a turning point for demand for food to go (FTG) as a convenient option for people to consume food as they start socialising outdoors," HSBC said.

The bank said that while the government has not ruled out reintroducing restrictions at a local level if needed, the initial stage can be compared to the market conditions seen in October 2020.

"At that time, Greencore's FTG sales were still down 22% year-on-year but at a much better level versus Q4 20 (-29% year-on-year) and versus January 2021 (-35% year-on-year).

"We, therefore, see the announced roadmap as a set timetable and an opportunity for Greencore to start building back its FTG business and leveraging its improved supply chain as well as existing and new business opportunities."

Deutsche Bank downgraded InterContinental Hotels to 'hold' from 'buy' on Wednesday and cut the price target to 5,380p from 5,600p following the company’s full-year results a day earlier.

"In our view, the business remains robust, and poised for outperforming the broader accommodation market through its exposure to midscale segment, to high growth geographies (North America and China) and through domestic demand," the bank said.

"However, much of this seems in the price now, with the stock having run up circa 12-13% year-to-date (versus Stoxx Euro 600 up circa 3%) and register +75% since our upgrade in April 2nd 2020."

Deutsche said that on its revised forecasts, IHG trades at about 24x price-to-earnings FY'23e, versus approximately 22-23x mid-cycle multiples on a one-year forward basis.

"We believe the risk-reward is on balance, and rate the stock a hold," it said.