Evolution upgrades Cookson, Tomkins, Weir, likes IMI
By BFN News | 01:33 PM | Monday 08 February, 2010
Evolution sees a considerable rerating opportunity in the UK Engineering sector. 'The scene is set for a number of UK engineering companies to transition from their current up to 40% discount to global peer group to parity,' says the broker.
IMI is going to deliver a 14%+ operating margin just months on from the trough of the worst downturn since 1945. 'However, it is still being valued on the basis of the classic 10s ? 10x PE, 10% margin and 1.0x ev/sales all through cycle.'
The stock is a core buy, says Evolution, upping its target price. It also likes Invensys for similar reasons.
Perceived balance sheet issues at Morgan Crucible have taken attention away from a robust margin profile, creating an opportunity.
On the momentum plays, Evolution particularly likes auto, with its potential recovery and growth rates plus increasing structural changes in the supply chain.
GKN and Tomkins are the preferred momentum/optionality stocks.
Recommendations:
AGA Rangemaster ? Add Target price: 200p (from 140p)
Bodycote ? Buy TP: 235p (from 200p)
Cookson ? Buy (from reduce) TP: 580p (from 375p)
GKN ? Buy TP: 185p (from 150p)
Hill & Smith ? Buy TP: 420p (from 360p)
IMI ? Buy TP: 825p (from 700p)
Invensys - Buy TP: 420p (from 400p)
Melrose ? Buy TP: 250p (from 200p)
Morgan Crucible ? Buy TP: 245p (from 200p)
Smith (DS) ? Buy TP: 200p (from 140p)
Tomkins ? Buy (from neutral) TP: 300p (from 160p)
Weir ? Add (from neutral) TP: 875p (from 825p)
Story provided by Business Financial Newswire