Berenberg lowers target price on Tekmar as coronavirus takes its toll

Analysts at Berenberg lowered their target price on subsea cables provider Tekmar on Tuesday after the group warned that it had been by the Wuhan coronavirus outbreak.

Tekmar reduced its full-year 2020 guidance on Tuesday but left its 2021 expectations unchanged - for now. The outbreak of the coronavirus, subsequent factory shutdowns and heightened travel restrictions in China affected the group's ability to manufacture components and also made the import and export of goods in the region more difficult.

"The company could source replacement components from Europe but the cost would be an order of magnitude higher and with just six weeks left before year-end, shipments may still fall into FY 2021," said Berenberg.

The German bank also noted that Tekmar had expected to generate roughly 10% of its forecast 2020 sales from Chinese offshore wind projects in the fourth quarter. However, these projects have also experienced delays.

While Berenberg pointed out that near-term risks were "certainly elevated", the analysts maintained that Tekmar's longer-term thesis remained "attractive".

"Tekmar remains the global market leader in offshore wind cable protection. Market growth forecasts are attractive, supported by a number of structural drivers, and Tekmar's products are critical at a cost that is insignificant to project capex."

Although Berenberg lowered its price target on the group from 180p to 165p, the analysts kept their 'buy' rating on Tekmar.