Berenberg remains 'enthused' by Diploma, hikes target price

Berenberg said Diploma's FY23 results showcased "a stellar performance" in the face of weaker peer reporting throughout Q3 and "a weak macroeconomic backdrop", demonstrating the power of the group's decentralised, increasingly diversified model.

While the German bank admitted that the shares "reacted positively" on the day, management commentary on expectations into next year – as well as a strong balance sheet and active £1.0bn pipeline of M&A opportunities – had kept it "enthused" on the story.

"We make slight upgrades to our forecasts (c2% FY24 EPS), move our price target to 3,800.0p, and reiterate our 'buy' rating," said Berenberg.

"We think that our organic forecasts do Diploma a disservice and ignore its status as a high-quality compounder. While shorter-term macroeconomic pressures in the likes of US OEM (destocking) and European seals (weak PMIs) suggest some challenges, management remains confident in a 5% organic growth rate – we think that this could prove conservative as the year plays out and note a 7% organic growth exit rate from Q4 FY23."

Reporting by Iain Gilbert at Sharecast.com