Jefferies upgrades Victrex to ‘hold’ on valuation

The bank pointed out that since it downgraded the shares to ‘underperform’ in January, the share price has declined 26% versus the wider UK Industrials sector up 6%.

It said the stock is now trading at "noticeable discounts" to its UK chemicals peer group versus historic premiums.

"There is no change to our fundamental view - while the near-term backdrop remains challenging, and several more structural longer-term questions remain, we believe downside risk is adequately priced in," Jefferies said.

Looking forward, Jefferies said its cautious view is driven by a lack of demonstrable volume growth over the long term, and that while Victrex's EBITA margins continue to sit at the top end of its coverage, broader questions remain around whether a more structural pricing reset is needed.

"However, we note that potential upside from 'mega-programmes' remains compelling, once we begin to see real momentum here, and present the opportunity for volumes & returns to improve over the medium-term."

The target price was cut to 1,100p from 1,150p, offering just 9% upside.