Victrex rallies as Liberum initiates stock at 'buy' following selloff

Shares in polymer solutions company Victrex rallied after Liberum initiated coverage of the stock at ‘buy’ with a 2,200p price target.

“We believe it is a great time to buy following a selloff in the shares year-to-date and the completion of a major investment programme that heralds a period of strong cash flow and further cash return potential of 200p,” it said.

Victrex recently completed a major capacity expansion programme at its main production site in Lancashire which Liberum reckons provides sufficient headroom in powder and film manufacturing for the next decade.

The brokerage noted that Victrex shares were hit hard this year by concerns about rival capacity increases and trading risks.

Liberum said it believes Victrex and the industry are capable of sustaining high-single digit volume growth over the next five years driven by ongoing industrial and medical demand for lighter/stronger materials which are easy to process and manufacture.

As far as structural growth is concerned, Liberum pointed out that the 10-year compound annual growth rate has been 15%. The brokerage believes strong growth remains, with seven major new product platforms being commercialised and a total industry volume potential 9 times today’s capacity.

At 1058 BST, Victrex shares were up 4.3% at 1,733p.