Johnson Matthey PLC's (LSE:JMAT) full-year results were broadly in line with the upgraded guidance the FTSE 100 specialty chemicals group had already provided, leaving the shares flat in early trading as investors focused instead on the $460 million Cormetech acquisition announced alongside the numbers.
Panmure Liberum, which rates the stock a 'buy' with a 2310p target price, described the financial year to March 2027 as set to be "an exciting year" for the group.
Pro-forma underlying operating profit rose 14% to £340 million, with Clean Air the standout division, delivering a 12% increase in underlying operating profit on an organic constant currency basis to £307 million despite an 8% fall in sales.
The margin expansion was striking, with Clean Air reaching 14.5% from 11.8% a year earlier, hitting the top end of its 14% to 15% target range for the full year. Panmure had forecast just £287 million for the division, and consensus sat at £293 million.
Hydrogen Technologies reached run-rate breakeven by the end of the fourth quarter, removing a drag that had weighed on sentiment.
Free cash flow improved markedly, swinging to a £168 million inflow from £64 million a year earlier, driven by higher profits and lower restructuring costs.
Net debt was higher than expected at £880 million, partly reflecting capital expenditure on a new precious metals refinery due to become operational in calendar year 2027, which will push the capital spending bill to around £230 million in the current financial year, up from a previous estimate of £140 million.
Management guided for low to mid-single digit percentage growth in group underlying operating profit at constant precious metal prices and currency, supplemented by a roughly £23 million tailwind from platinum group metal prices and foreign exchange.
Panmure expects consensus operating profit estimates to settle around £386 million for the current year, roughly 6% above where the market currently sits, once the Cormetech acquisition's estimated £11 million contribution is included.
The broker argues that a calendar year 2027 price-to-earnings multiple of 13.1 times fails to reflect the upside from the pending Catalyst Technologies disposal and the durability of internal combustion engine demand.
In early trading, the stock was changing hands for 2,177.12p.