Berenberg lowers target price on Chemring

Analysts at Berenberg lowered their target price on aerospace and defence group Chemring from 420.0p to 380.0p but said the firm was "well-positioned" for 2023.

Berenberg said Chemring enters the new year with 86% of expected full-year revenues already under contract, marking the fourth sequential annual improvement.

The German bank stated that while Chemring's share price performance was "underwhelming" in 2022, it expects to see "a stronger performance" in 2023 as the tailwind from rising defence budgets becomes more evident in order intake and underlying trading.

"The group continues to manage ongoing supply chain challenges well, and we are confident that Chemring can deliver another year of improving execution," added Berenberg, which stood by its 'buy' rating on the stock.

"Additionally, the upcoming procurement decision on the circa $800.0m Aerosol & Vapor Chemical Agent Detector (AVCAD) US contract is a key potential catalyst."

Berenberg added that its reduced price target primarily reflected a higher discount rate in its discounted cash flow methodology and lowered revenue estimates on a US programme.

Reporting by Iain Gilbert at Sharecast.com