RBC has taken the scalpel to Morgan Advanced Materials plc (LSE:MGAM), downgrading the shares from 'outperform' to 'sector perform' and trimming its price target from 250p to 210p. The shares fell 3% to 188.8p.
The broker argues that, after a difficult spell for the ceramics and carbon specialist, investors are unlikely to give the benefit of the doubt until they see evidence of a genuine recovery.
The shift follows October’s profit warning, which revealed softer trading across several end markets and a slower rebound in semiconductor demand.
RBC says this leaves Morgan entering 2026 with a weaker profit base. It now forecasts next year’s EBITA, a measure of operating profit that excludes certain charges, to fall 6% year-on-year, leaving it about 35% below the level reached in 2022.
The analysts expect only “slight growth” in sales in 2026, with margins held back by a mix of factors including underused factory capacity, business mix and currency movements.
The broker also highlights several drags on next year’s numbers: a £4 million headwind from Morgan’s exit of its crucibles business, around £7 million of start-up costs tied to new semiconductor capacity, and only a modest £3 million benefit from earlier cost-cutting plans.
The rough maths leaves a starting point of roughly £80 million in EBITA for 2026 before any operational improvements.
Management will set out more detail at a strategy day on 4 December, the first under new chief executive Damien Caby, who took the helm in July.
RBC expects a focus on trimming the manufacturing footprint and improving processes, along with expansion into adjacent markets.
But, given the “troubled last few years”, the analysts reckon the market will want to see evidence that these plans can deliver before rerating the stock.
Medium-term prospects are not dismissed entirely. RBC still sees potential for margins to move back toward 12.5% over time and notes that demand in the semiconductor sector should improve further out.
But for now, the tone is cautious, and the shares, last seen at about 195p, are unlikely to move far until Morgan can show some sustained progress.