Berenberg cuts target price on Midwich

Analysts at Berenberg cut their target price on audiovisual distributor Midwich from 620.0p to 460.0p on Tuesday, citing "significant disruption" caused by the Covid-19 pandemic.

Berenberg said Midwich's 2020 first-half results reflected the significant disruption caused by Covid-19, with a "considerable reduction" in organic growth and substantial margin headwinds resulting in roughly 82% and 55% cuts to its 2020 and 2021 earnings per share estimates for the group.

However, importantly, the German bank highlighted pressures the company had faced as a result of the coronavirus outbreak may have actually caused no structural damage.

Given the impact on profitability over the course of the full-year, Berenberg expects Midwich's leverage to reach 2.2 times net debt/underlying earnings, which it said was "well within management's targeted range" and should help the company rapidly de-lever as profitability rebounds.

"While there is considerable uncertainty about the market's eventual recovery, Midwich still has the potential to continue its geographic expansion within the $100.0bn AV market," said Berenberg, which also retained its 'buy' rating on the firm.