RBC raises target price on Bodycote

Bodycote last week reported in a trading update that group revenue fell 4.9% between 1 January and 30 April from the same period last year to £192.4m, or 9.1% at constant exchange rates.

After taking into account the group's exit from Brazil and the restructuring actions announced in 2015, like-for-like revenues were down 2.7%, or 7% at constant exchange rates.

The metal treating specialist said the restructuring programme announced at the time of the 2015 interim results is now essentially complete with the associated costs and benefits accruing in accordance with the guidance given at the full year results in February.

The group added that given the performance in the first four months of 2016, the board's expectation for results in 2016, at current exchange rates, is unchanged from the time of the 2015 annual results announcement in February.

RBC said upticks in aerospace and the US provide reasons for optimism, along with easing comparators.

The broker added that while oil and gas headwinds look likely to remain, it represents a small portion of the business.

However, general industrial weakness may prove more persistent and meaningful, RBC said.

“Positively, the business appears to be proving its margin resilience and were the economic outlook to improve, we would expect Bodycote to be one of the major beneficiaries. For now, we see the shares approaching fair value.”]

RBC left its rating on the stock at 'sector perform'.

Shares fell 0.82% to 605.5p at 1159 BST.