Berenberg lowers target price on Victrex

Analysts at Berenberg lowered their target price on high performance polymers business Victrex from 1,680.0p to 1,491.0p on Thursday, stating the group was "not out of the woods yet".

Berenberg, which has a 'hold' rating on the stock, said Victrex's H124 results in brought with them guidance that translated into no profit growth in FY24 despite a better H2 than H1.

The German bank said Victrex was "paying the price" of longer-than-expected de-stocking in medical, the slow ramp-up of its new plant in China, and a prolonged impact from lower asset utilisation.

On a positive note, Berenberg pointed out that volumes have finally started to show some signs of stabilisation, with Q2 sales volumes, at 989 tonnes, down by only 1% year-on-year and up by 31% sequentially from Q1.

However, Berenberg noted that although the recovery in some key end-markets may have started, it said management’s track record of "overoptimistic assumptions and questionable execution" will continue to weigh on the shares for quite some time.

"We reduce our FY 2024 estimates sharply on the back of the poor H1 results. Our adjusted PBT is now £67.4m. Our reported EBIT is affected by the recent impairment of £20.1m on the Bond 3D investments. We value Victrex using a mix of DCF and multiples," concluded Berenberg.

Reporting by Iain Gilbert at Sharecast.com