Berenberg downgrades Johnson Matthey to ‘hold’

The bank said Johnson Matthey’s (JMAT) equity story is "absorbing".

"There are few clearer examples of the tension between a declining core business (autocatalysts) and newer growth segments (catalysts, hydrogen tech)," it said.

It noted that the progress made under the new chief executive in securing customers for catalyst technologies and anchor contracts in hydrogen left the bank hopeful of a turnaround.

However, Berenberg said it has "grown more doubtful" about JMAT’s ability to grow earnings in the next few years or expand its valuation multiple beyond circa 7x EV/EBITDA.

It pointed out that platinum group metals prices, especially rhodium, have been under pressure and said higher interest rates are not supportive of automotive sales.

"The increasingly likely delay to and/or watering down of the Euro 7 emissions legislation also limits upside to consensus profit estimates for the company’s clean air division," it said. "The buyside is likely aware that consensus EBIT is too high in the near term, but we are uncomfortable remaining buyers when our EBIT is close to 20% below Bloomberg consensus for 2026.

"Downward earnings momentum and needed investments in growth call into question the mid-term tenability of the GBP77/share dividend floor. We forecast a cut for FY 2025."