Jefferies upgrades Victrex to ‘hold’ on valuation

Jefferies upgraded Victrex on Wednesday to ‘hold’ from ‘underperform’ "purely" on valuation grounds.

The bank pointed out that since it downgraded the shares to ‘underperform’ in January, the share price has declined 26% versus the wider UK Industrials sector up 6%.

It said the stock is now trading at "noticeable discounts" to its UK chemicals peer group versus historic premiums.

"There is no change to our fundamental view - while the near-term backdrop remains challenging, and several more structural longer-term questions remain, we believe downside risk is adequately priced in," Jefferies said.

Looking forward, Jefferies said its cautious view is driven by a lack of demonstrable volume growth over the long term, and that while Victrex's EBITA margins continue to sit at the top end of its coverage, broader questions remain around whether a more structural pricing reset is needed.

"However, we note that potential upside from 'mega-programmes' remains compelling, once we begin to see real momentum here, and present the opportunity for volumes & returns to improve over the medium-term."

The target price was cut to 1,100p from 1,150p, offering just 9% upside.