Melrose Industries 'presents compelling investment opportunity', says Citi

14th Mar 2025 07:44

(Sharecast News) - Citi reiterated its 'buy' rating on Melrose Industries on Friday as it said it "presents a compelling investment opportunity", sending shares in the aerospace manufacturing firm higher.

The bank, which has a 735p price target on the stock, acknowledged investor concerns regarding variable consideration impacting free cash flow.

"However, Melrose forecasts cash flow directly from expected shop visits/deliveries, with EBIT derived from cash," it said.

"We continue to believe the strength of the business lies in the strong, long-term cash generation from RRSPs, which supports the company's projected free cash flow of £600m in FY29."

Citi noted that the stock is now trading at a significant discount to peers, even adjusting for increased risk.

"We therefore believe Melrose presents a compelling investment opportunity."

At 1005 GMT, the shares were up 2.2% at 507.20p.