HSBC has maintained their buy rating on Spectris despite lowering its sales and EPS forecasts for 2024.
Spectris, the supplier of high-tech instruments and software for use in technical industrial applications, has recently announced a 16% drop in first half sales accompanied by a 66% drop in operating profit as slower trade in China dragged on performance. Lower demand from the EV market also weighed.
Shares dipped after the release of half-year results, and HSBC said there was a risk of further earnings downgrades in 2024.
However, HSBC remains confident of the company’s medium-term outlook and has a 3,700p price target for the stock, which currently trades at 2,896p.
“We think Spectris still faces earnings risk in 2024 from any potential meaningful internal or external disruptions,” HSBC analysts wrote in a note.
“These, however, do not deter the medium-term attractiveness of the investment case, in our view. The recent meaningful acquisitions of SciAps and Micromeritics widen the scope within its material analysis portfolio.
“We view 2024 as truly a foundational year with a low base for delivering in 2025 and beyond. Our estimate cuts and the effect on our blended 50/50 valuation (DCF and multiples-based sum-of-the-parts approach) lowers the TP to 3,700p (old: 3,750p) though we reiterate the Buy rating as our target price implies 28.7% upside. Spectris trades at 2025e EV/EBITDA of 10.8x and PE of 15.5x.”