Berenberg upgrades Victrex to ‘buy’, cites attractive risk/reward

Berenberg upgraded Victrex on Monday to ‘buy’ from ‘hold’ and lifted the price target to 2,090p from 1,750p, as it argued the current risk/reward is attractive.

It noted that Victrex’s recent profit warning spooked the market, sending the company’s share price to a seven-year low.

"We believe that this represented a clearing event and earnings should now be reaching their trough this fiscal year," Berenberg said.

It added that the drop seen in volumes in the third quarter sets FY23 volumes near to the level achieved in FY20.

Berenberg said: "In our view, investors should buy the stock as: i) consensus estimates are now properly rebased; ii) Victrex has been slower than expected to implement pricing initiatives, but these have recently started to come through and are here to stay - partly offsetting the negative mix coming from the rebound in VAR and new business in China; and iii) free cash flow is inflecting next year as the capex cycle comes to an end and the build-up in inventories is going to unwind."