Genus PLC (LON:GNS) has been upgraded to a ‘buy’ from a ‘hold’ rating by broker Kepler Chevreux who believes the fall in the animal genetics company’s share price on the back of fears over the outbreak of African swine fever has been overdone.
Genus’s share price is 25% off the peak it reached last July, triggered by the outbreak of African swine fever (ASF) in China.
China accounts for 10% of earnings of Genus’ porcine division and for 15% of group earnings.
“In the short term, we regard African swine fever as a manageable one-off. Our base case assumes a 25% cut in PIC’s volume and EBIT in China in 2019E,” Kepler analysts said in a note to clients.
“We see the 25% decline in the share price as overdone and upgrade our rating from ‘hold’ to ‘buy’,” they added.
Kepler believes the fever will likely cause a modest slowdown in volume growth and a 1% cut in 2019 forecast earnings per share (EPS). In a worst-case scenario, another 5% cut in 2019E EPS might be needed, they add.
Shares in Genus were 8.2% up at 2,504.0p in late morning trade.