Broker tips: ITM Power, Coats Group, Ryanair

2nd Aug 2024 15:44

(Sharecast News) - RBC Capital Markets reiterated its 'outperform' rating on ITM Power on Friday as it pointed to a "relatively attractive" risk/reward profile.

"While we lower our delivery trajectory for the rest of the decade on more prudent delivery assumptions, ongoing commercial momentum offers strong evidence of validation of the firm's technology and manufacturing capability, while a major project reaching FID now also suggests less top-line risk vs peers for the near-term," the bank said.

It cut its price target on the shares to 100p from 150p but said "we are still left with nearly 100% implied upside from today's share price".

RBC said ITM Power is poised to be a key player in the Green Hydrogen sector given its growing position in the European electrolyser space.

"We expect the strategic partnerships with Snam and Linde to drive a substantial increase in revenues over the next three to five years," it added.

Analysts at Berenberg raised their target price on thread and structural components manufacturer Coats Group from 100.0p to 120.0p on Friday as it said the group was "knitting it all together" during H1.

Berenberg said Coats' interim results for the six months to 30 June showed "a highly credible organic growth performance" and noted that a slight upgrade to FY24 guidance, stronger-than-expected margin performance and incrementally more positive commentary about the market recovery saw the shares react strongly on the day after having been range-bound for the past few years.

"At a current valuation of 12.5x FY25 P/E, we still see a lot to like in the shares. We move our price target to 120p (from 100p) as the group enters into what we expect could be the start of a sustained market recovery and upgrade cycle," said Berenberg, which stood by its 'buy' recommendation on the stock.

"We roll our previous valuation methodology of 15x FY1 P/E over from our FY24 forecasts to our FY25 forecasts. Beyond mechanics, we also think it is logical to assign more value to Coats on the back of its H1 results: organic growth has continued to build, with all three divisions in growth in Q2, and this is expected to continue; margins of 18% were provably ahead of management's FY24 target; and volumes and destocking trends have continued to normalise into what now looks like a sustainable market recovery."

Citi added Ryanair to its 'Europe Focus List' on Friday and opened a 90-day 'positive short-term view' as it has seen increased client interactions following the first-quarter results.

"The key debates have been 1. Pricing Weakness: Is it company-specific or industry wide? Why is Ryanair pricing underperforming other LCC (low-cost carrier) peers? 2. Cash Return: Can the company announce additional cash returns (i.e. top-up the ongoing share buyback) at the AGM in September? 3. Valuation: What has been the fleet value and what has been the historical trend around EV/IC?"

Citi said it was interesting that it has not seen much debate around unit cost performance.

"Overall, we believe the recent move in the share price is likely overdone given the attractive valuation and market share strength," it said.

Earlier on Friday, Ryanair reported an 8% jump in passenger numbers for July. Traffic rose to 20.2m from 18.7 in the same month a year earlier, while the load factor - which gauges how full the planes are - was stable at 96%. On a rolling 12-month basis, passenger numbers grew 9% to 190.4m and the load factor steady at 94%.