Shares in polymers specialist Victrex PLC (LON:VCT) gave up a month’s worth of gains on Friday after Peel Hunt downgraded its recommendation to ‘hold’ from ‘add’.
The broker said a global industrial slowdown has dented hopes of recovery in the second half, following two profit warnings earlier this year.
READ: Victrex once again dampens down expectations
Victrex supplies its PEEK thermoplastics to be used as films, pipes, brackets and other structural components for sectors including aerospace, automotive, electronics, energy and medical.
In light of the weaker macro-economic backdrop through the second quarter of the calendar year, notably in Germany, Peel Hunt’s analysts further reduced their forecasts for full-year PEEK volumes as they now assume no pick-up in the second half.
“There is no evidence of a sustained recovery in automotive volumes and the outlook for electronics and general industrial activity in H2 has deteriorated,” the wrote in a note to clients, anticipating a 22% year-on-year decline in volumes in the third quarter, a similar magnitude to the first, before a flat in fourth quarter.
The result is a 5% downgrade to the profit before tax estimate for this year and next to £105mln and £108mln, for earnings per share of 107.1p and 110.1p, putting Peel Hunt the bottom of the City’s range for both years.
“For now, the near term risks outweigh the long-term growth potential,” the analysts said, cutting their target price to 2,150p from 2,350p.