Jefferies upgrades Aveva to 'buy'

Jefferies upgraded its stance on shares of Aveva on Thursday to ‘buy’ from ‘hold’ and hiked the price target to 4,500p from 4,000p .

It said that with the near-finalised acquisition of OSIsoft, it has a large opportunity to convert an enlarged customer base to a financially accretive subscription model.

"OSIsoft's product portfolio is complimentary to Aveva’s, enabling greater up- and cross-sell to customers," Jefferies said.

Jefferies said that post-merger, Aveva’s oil & gas vertical exposure will decrease from around 40% to 35% of revenue. "Importantly, the mix shift will also increasingly skew towards more mid- & downstream exposure, which is likely less volatile than upstream exploration," it said.

The bank also highlighted an attractive valuation, pointing out that post-merger, Aveva is trading as one of the cheapest companies in the engineering software group at 9.3x EV/FY22 and 8.6x EV/FY23 revenue, compared to the peer group trading at 12.9x and 11.6x.