Canaccord raises target price on Volex following Irvine acquisition

Canaccord said the acquisition of Irvine Electronics strategically enhanced the firm's North American IMS offering by adding capacity and technical know-how on the West Coast while strengthening its presence across attractive defence, military, aerospace and medical markets through a blue-chip customer base.

The Canadian bank, which stood by its 'buy' rating on the stock, adjusted its estimates for Volex in order to reflect the acquisition, factoring in a 4.5-month contribution for the 2022 trading year.

"As a result, we see adjusted pre-tax profits increase $900,000 to $51.6m in FY22E, before rising $2.8m to $58.3m in FY23E and $3.1m to $63.7m in FY24E. This drives EPS accretion to our estimates of 1.8%/5.1%/5.0% for FY22E/23E/24E respectively," said the analysts.

"Importantly, we note that our estimates see Volex hitting its 2024E revenue target of $650.0m and $65.0m of underlying operating profit without further mergers and acquisitions."