The FTSE 100 company, which is one of the world’s largest makers of catalytic converters, reported a fall in annual profits last week as restructuring costs and a legal charge weighed down full-year results.
Johnson has also come under fire from UBS – the Swiss bank has a ‘sell’ rating on the stock – which has urged caution because of the “long-term challenges” faced by the company.
Analysts there have raised questions over the demand for catalytic converters over coming years as electric cars gain more and more market share, while they also noted the heavy cost of research into battery materials despite “limited visibility about the success of technology”.
Liberum analyst Adam Collins has taken a more upbeat approach and expects Johnson to enjoy a couple of years in the sunshine.
Clean Air to lead the way
By contrast, he also thinks the Clean Air division – the one which makes catalytic converters – to be one of the key growth drivers as the firm corners more of the market.
“After a few years of dull growth and intra-year disappointments, we think the downgrades are over and organic growth will be solid in FY18/19 and strong in FY19/20,” wrote the analyst in a research note.
“We expect Clean Air to enjoy double-digit EBIT growth in both of the next two years due to EU diesel share gains worth £40mln, augmented by strong US truck market momentum this year and China6 content gains next year.
“Additionally, we expect Health to deliver double-digit growth in FY19/20 as some of the 40 product pipeline kicks in.”
Collins upped his recommendation to ‘buy’ from ‘hold’ and also raised his target price to £40 from £33.
JMAT shares rose 1.3% to £37.01 in late-morning trading.