- Dowlais Group
- 11 July 2023 16:26:49
Source: Sharecast
The bank noted that consensus expects electrification to be neutral/positive for Dowlais, but said that its deep dive suggests battery electric vehicles (BEVs) could be a risk in the mid-term, with around 45-50% of sales seeing margin pressure.
"In this relatively technical and under-researched space, our due-diligence includes in-depth proprietary work on the EV powertrain sub-sector and feedback from those involved in EV design and/or purchasing at car-makers," it said.
"In a nutshell, many of the components Dowlais competes in are at risk of commoditisation and/or content-loss and/or over-capacity in the BEV world amid current or upcoming tech-disruptions."
Citi also said that relatively high net debt and near zero FY23 free cash flow add to concerns, should the cycle turn.
Citi pointed out that the shares are trading at a premium of around 20% to peers.
The bank said it’s 5% to 10% below consensus 2024/25 and has opened a “negative catalyst watch” on the stock into results.
Berenberg reiterated its ‘buy’ recommendation on Moonpig as it argued that while the shares have performed well year-to-date, it continues to see a re-rating opportunity.
"Moonpig is a market-leading business generating a 20%-plus return on invested capital; we expect it to return to double-digit earnings growth in outer years and think it has a clear path to de-leveraging rapidly," Berenberg said.
The bank said Moonpig ultimately delivered on its revised revenue guidance of £320m for FY2023 and profitability was "robust".
It noted that despite performing well so far this year, Moonpig shares still trade on just a 9% CY 2024 estimated free cash flow yield and 15x price-to-earnings, which it believes is too cheap for a business it expects to return to double-digit earnings growth in outer years.
"We believe fast de-leveraging over the coming years can drive a further re-rating," Berenberg said.
It cut its price target on the shares to 250p from 270p.
