ShoreCap reiterates 'buy' rating on 'high-quality' Halma

Shore Capital said overall, Halma had made "good progress" during the first half of the 2022 trading year, with "substantial growth" expected for the year as a whole due to both order intake and revenues projected to be higher year-on-year.

The bank, which has a 2,516.0p target price and 'buy' rating on the stock, stated that Halma had "adapted and responded effectively" to operational challenges stemming from the Covid-19 pandemic and continued geopolitical tensions in Eastern Europe.

ShoreCap said Halma has direct exposure to Russia and Ukraine, but noted that it had ceased all sales into the former, which accounts for less than 0.5% of group revenues, and had no "significant" supply chain dependency on either country.

"In our view, Halma is a high-quality business with long-term growth drivers (increasing health and safety regulation, demand for healthcare services in developing economies and demand for life-critical resources) and strong operating margins," said ShoreCap.

"We believe customer investment cycles could recover faster (as they look to meet increasing regulatory standards and greater leverage from a Covid-19 recovery), thus we could see further upside to our assumptions and Halma growing by more than 15% CAGR which is what our valuation currently assumes."