JPMorgan upgrades IMI to 'overweight'

JPM said its analysis of both the 2014 and 2018 period and the progress since, suggests that for the first time in a number of years the strategy, financials and valuation are in sync, creating a "compelling investment opportunity".

"It is impossible to ignore the disappointing share price and headline financials; however, we believe there is some mitigation and indicators of potential upside for the coming years; 1) IMI's underperformance versus our 'Synthetic IMI' is less pronounced, speaking to market-specific challenges, 2) Pressure on margins in 2014- 2016 can be partly explained by increased investment for growth, 3) Investment in SG&A, R&D and capex was above historic levels through the period.

"We see this increased investment alongside the focus on operations as having the potential to deliver a benefit to IMI financials as volumes recover."

JPM said IMI is attractively valued across all metrics, trading at a 10-year low versus the MSCI Europe Capital Goods and being one of the cheapest stocks in its sector on historic relative multiples. It is also at a "significant” discount to JPM’s sum-of-the-parts implied fair value of around 1,500p.

At 1040 GMT, the shares were up 3.4% at 1,137p.