Electrocomponents boosted by Citi upgrade

Electrocomponents got a boost after Citigroup upgraded the stock to ‘neutral’ from ‘sell’ and lifted the price target to 375p from 235p.

The bank said the change in recommendation reflects earnings per share upgrades and recognises gross margin stabilisation, increased own brand penetration, cost streamlining efforts and greater client focus.

Following FX tailwinds and a better-than-expected second-quarter performance, driven by gross margin stabilisation and £15m cost savings, Citi upped its profit before tax and amortisation estimate for this year and next to £102m from £86m and to £113m from £93m, respectively.

“Electrocomponents has a fully-expensed, high-quality warehouse infrastructure in place in most key markets, with an integrated ERP capability. It seeks to deliver top-line growth by offering a broad product offering, including own branded goods, in combination with increased customer focus and cost leadership,” the bank said.

However, it noted there is limited upside to its target price.

At 1235 BST, the shares were up 2.9% to 374.60p.