Berenberg hikes target price on XP Power

Berenberg said that after upgrading the stock following its 2 October profit warning and an expected equity raise, it was now out the other side of the event, with the company having raised roughly £45.0m earlier in November. While not quite the form or size of the approximately £80.0m rights issue it had anticipated, Berenberg noted XP's shares were still up by roughly 25% since 25 October.

"Now, the balance sheet has been repaired and the valuation continues to be attractive when we consider self-help measures and our view of XPP's status as a long-term winner," said Berenberg.

While shorter-term markets remain challenged, Berenberg thinks the stock's risk/reward scenario has become "comfortably skewed" to the upside for investors.

"XPP trades on 12.8x FY24 P/E and 10.1x FY25 P/E. Previously, we have commented on potential pressures on FY24 trading given uncertainty around the semiconductor cycle, but new clarity on self-help measures offers further downside protection on our already trough-margin forecasts," said the analysts.

"We would also note, although no detail was given, XPP announced it received several takeover approaches during October. If we were to assign the average UK takeout premium year-to-date of circa 49% to the £10 price the shares settled at pre-raise, this would imply comfortable upside to the shares from here as well."

Reporting by Iain Gilbert at Sharecast.com