HSBC has reaffirmed its buy rating on discoverIE Group plc following the company's capital markets day (CMD) on 11 September.
Despite some observable short-term risks, the bank pointed to discoverIE's “attractive” valuation, underpinned by an 8-9% free-cash-flow yield at the current share price of 603p.
The CMD was the company’s first in six years and highlighted discoverIE’s transformation into a pure electrical components business.
While HSBC’s earnings estimates remain 3% below consensus, the bank continues to view the company’s valuation as compelling, given its internal potential for margin improvements.
DiscoverIE’s acquisition strategy, focused on higher-margin companies, was also highlighted as a key driver of future growth.
Management confirmed its strategic goals, including achieving adjusted operating margins of 15% by FY2028, cash conversion of over 85%, and a return on capital employed (ROCE) of over 15%.
HSBC reiterated that these targets, coupled with the company's long-term acquisition-led growth strategy, position discoverIE well for future growth despite the current earnings risk.
The bank maintained its target price of 855p per share.