Berenberg starts Renishaw coverage with 'buy' rating

The market is not giving Renishaw credit for its ability to bounce back from downturns, Berenberg analyst Anthony Plom said. He forecast earnings 8% ahead of consensus for 2021 and 22% ahead for 2022.

Covid-19 will not derail trends supporting better quality, safer and more environmentally friendly products, Plom said. These factors will continue to drive sales of Renishaw's metrology equipment, he argued.

"In prior cycles, consensus has consistently underestimated the speed of recovery at Renishaw and we believe this time is no different, Plom wrote in a note to clients. "Key end-markets are showing signs of a recovery, which we expect to drive a sequential improvement in Renishaw’s sales."

Plom set a price target of £57 a share. The shares rose 4.8% to £51.30 at 13:26 BST.

China is still a big opportunity and if supply chains are brought closer to home that could spur more demand, Plom said. Competition in the metrology market has stiffened but Renishaw is the sector leader in research and development and sales should increase by a compound 5-10% through the cycle, Plom said.

Seen as a long-term investment Renishaw has groundbreaking neurological products, including a Parkinson's disease treatment, and 3D metal printing technology that could add more than £500m to earnings in 10 to 15 years and increase the company's value by billions of pounds, Plom said.