Berenberg ups rating on IMI to 'hold'

Berenberg has upgraded its rating on IMI, arguing that market expectations for the British engineering group are too conservative.

In a note published on Wednesday, the bank said it had identified three core reasons for adopting a more positive stance, which has seen it increase its recommendation to ‘hold’ from ‘sell’.

As well having increased confidence in the group’s ability to retain costs savings, Berenberg said: “We believe market expectations for the full-year appear conservative and we sit 3% ahead of consensus earnings per share, and we support the shift in capital allocation to rebase the dividend and enable a higher rate of reinvestment in order to drive growth.”

It did, however, sound a note of caution, arguing that following an 80% re-rating of the shares over the past six months, and “with lingering concerns about the longer-term growth prospects”, there was better value elsewhere.

“It is rare to see a coordinated recovery across all three of IMI’s divisions, with an upturn in one end market often cancelled out by challenges in another,” it added.

Berenberg also upped its price target for the FTSE 250 firm, to 995p from 635p. As at 1415, shares in IMI were flat at 1,068p.