Deutsche Bank slashes forecasts for Morgan Advanced Materials

Deutsche Bank has lowered its target price for Morgan Advanced Materials (MGAM) from 320p to 295p after the carbon and ceramic materials maker lowered its guidance last week.

In a third-quarter update on 5 November, MAM said market conditions have weakened during the second half and full-year sales are likely to rise by just 3% at constant currency, compared with previous guidance of the top end of the 4-7% range. Meanwhile, additional FX headwinds mean the adjusted operating profit margin would be around 11.4%, down from a previous target of 12.5%.

Deutsche Bank pointed out that, despite the weaker full-year outlook, the stock has risen 3% since the update – most likely because of the news of a £40m share buyback announced alongside last week's update, which "suggests some investors are starting to look through near-term trading and sense a trough in expectations has been reached".

"While we have some sympathy with this view, we retain our 'hold' rating on the shares for the moment," the bank said.

Deutsche Bank has slashed its earnings per share forecasts for this year and the next by 14% and 11%, respectively, partly due to recent order deferrals from MGAM's silicon carbide customers, where margins are high. Meanwhile, the bank said the "speed and extent to which second half expectations have reduced makes us nervous regarding momentum entering 2025".

MGAM shares were down 0.6% at 252.5p by 1207 GMT.