Citi starts Melrose Industries at 'buy'
Citi initiated coverage of Melrose Industries with a 'buy' rating and 220p price target on Monday, saying it "uniquely" offers investors an opportunity to invest in a FTSE 100 company with "a consistent track record as an industrials turnaround specialist".
FTSE 100
8,030.33
17:15 13/11/24
FTSE 350
4,434.70
17:14 13/11/24
FTSE All-Share
4,392.88
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Industrial Engineering
11,694.31
17:14 13/11/24
Melrose Industries
516.20p
16:40 13/11/24
The bank said it sees 300 basis points group margin improvement in 2018-22 as the legacy of margin underperformance versus peers at both GKN Automotive and GKN Aerospace offers management "significant self-help upside" opportunity.
"We see margin improvement contributing 52% of the upside to our target price, with sales growth contributing only 16%," it said.
"Indeed as a turnaround specialist, Melrose’s business model is less reliant on 'the cycle' and top-line growth for delivering returns, making it particularly appealing for capital goods investors suffering from end of cycle fears/'endcyclitis'."
Citi added that in its coverage universe, alignment of management and shareholders' interests as well as transparency/scrutiny of targets is greatest at Melrose.