On Monday, Deutsche Bank (ETR:DBKGn) adjusted its outlook for Johnson Matthey PLC (LSE:LON:JMAT) (OTC:JMPLY), reducing the stock's price target from £24.00 to £23.00, while reiterating a Buy rating.
The firm anticipates a 3% year-over-year decline in first-half 24/25 EBIT to £174 million, attributing the decrease to a variety of factors including lower contributions from now-divested Value Businesses, foreign exchange impacts, and performance in Clean Air and PGM Services. This is expected to overshadow gains in Catalyst Technologies and reduced losses in Hydrogen Technologies.
Excluding the divested Value Businesses, Deutsche Bank expects a slight increase in EBIT, projecting a 1% year-over-year rise for the first half. However, the full-year forecast for EBIT stands at £408 million, which is 4.4% below the consensus that is lagging behind. The management at Johnson Matthey has provided guidance indicating an underlying EBIT growth from continuing operations of "at least mid single digits" at constant precious metal prices and foreign exchange rates.
Deutsche Bank has also revised its EBIT forecasts for fiscal years 25-27 downward by 1-7%, with corresponding 1-8% reductions in EPS forecasts. These revisions are primarily driven by downgrades in the Clean Air division. Despite the downward adjustment, the analyst believes the stock presents value, noting that at the current price, Johnson Matthey is trading at 5.5 times the estimated 2025/26 EV/EBITDA and offers a 7.6% free cash flow yield.
The analyst's comment highlights the rationale behind the maintained Buy rating, stating, "With the stock trading at 5.5x 2025/26E EV/EBITDA and a 7.6% FCF yield, we believe the stock is too cheap. Buy."
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