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Johnson Matthey boosted by Berenberg upgrade to ‘buy’, thinks battery opportunity in "for free”

Berenberg's analysts said Johnson Matthey’s “recently announced share gains in European autocatalysts should facilitate a return to high-single-digit earnings growth, and we believe it is more than credible in batteries”
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The broker also raised its target price for the FTSE-100 listed firm to 3,680p, up from 3,350p previously, with the stock trading at 3,230p in late morning trading.

Johnson Matthey PLC (LON:JMAT) found support today from an upgrade in rating by German broker Berenberg to ‘buy’ from ‘hold’ saying it believes the specialty chemicals firm’s stock offers an electric car battery “opportunity for free”.

The broker also raised its target price for the FTSE-100 listed firm to 3,680p, up from 3,350p previously, with the stock trading at 3,230p in late morning trading, ahead 2.1% or 66p on Friday’s close.

READ: Johnson Matthey's electric dreams: To invest £200mln in electric vehicle lithium battery business expansion

In a note to clients, Berenberg’s analysts said: “Concerns about falling light-duty diesel market share, latecomer status in batteries and lack of earnings growth have meant that the stock has trodden water since July 2016.”

However, they added, Johnson Matthey’s “recently announced share gains in European autocatalysts should facilitate a return to high-single-digit earnings growth, and we believe it is more than credible in batteries.”

The analysts said: “We do not believe that JMAT, the largest single spender on R&D in UK chemicals, is the kind of company to make exaggerated technological claims about eLNO (enhanced Lithium Nickel Oxide) cathodes in the hopes of constructing an equity story that later proves baseless.“

They added: “We have attempted to verify the claims about eLNO and believe it could capture 10% of the EV cathode market by 2025, worth GBP600m (c10% of market cap) at 11% global EV penetration.“

Johnson Matthey announced last September that it would invest £200mln into the development of high energy battery material in 2018.

The group is expected to issue a trading update on Tuesday, January 16 when investors will be hoping for more details on the battery development plans.

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