Canaccord raises target price on Volex following Irvine acquisition

Analysts at Canaccord Genuity raised their target price on electronic connectors manufacturer Volex from 475.0p to 500.0p on Friday following the group's acquisition of Irvine Electronics.

Canaccord said the acquisition of Irvine Electronics strategically enhanced the firm's North American IMS offering by adding capacity and technical know-how on the West Coast while strengthening its presence across attractive defence, military, aerospace and medical markets through a blue-chip customer base.

The Canadian bank, which stood by its 'buy' rating on the stock, adjusted its estimates for Volex in order to reflect the acquisition, factoring in a 4.5-month contribution for the 2022 trading year.

"As a result, we see adjusted pre-tax profits increase $900,000 to $51.6m in FY22E, before rising $2.8m to $58.3m in FY23E and $3.1m to $63.7m in FY24E. This drives EPS accretion to our estimates of 1.8%/5.1%/5.0% for FY22E/23E/24E respectively," said the analysts.

"Importantly, we note that our estimates see Volex hitting its 2024E revenue target of $650.0m and $65.0m of underlying operating profit without further mergers and acquisitions."