Shares in Johnson Matthey PLC (LSE:JMAT) were up 3% after a leading investment bank upgraded stock in the catalytic converter maker.
JP Morgan moved to 'neutral' from 'underweight' as it took a less bearish stance on the prospects for the business while noting its 1,600p price target for the stock is now 17% below the current valuation.
JPM's upgrade came as part of a broader review of European chemicals stocks, which it describes as being at or near cyclical lows.
Despite this challenging backdrop, the sector is expected to see modest improvements in earnings from cost-saving measures and potential macroeconomic recovery in key markets such as construction and automotive.
While Johnson Matthey is not yet among the top picks, JPM noted its focus on sustainable technologies, which could provide growth opportunities amid increasing demand for cleaner energy solutions.
It also highlighted other upgrades in the sector, including Akzo Nobel and Air Liquide, which were both moved to 'overweight' due to their potential for earnings growth and strategic cost measures.
Overall, JPM's outlook signals cautious optimism for the European chemicals sector, with selective opportunities for investors to benefit from a recovery in cyclical markets and corporate efficiency efforts.
In afternoon trading the shares were changing hands for 1,401p, up 42p.