Shares in the chemicals group have underperformed the wider sector in the past year and over three-year and five-year timeframes, which the US investment bank said reflected ongoing “structural mid- to long-term growth concerns” in the key auto catalysts business, which makes up 65% of Johnson Matthey’s profits.
As car manufacturing shifted gear last year, with the IMF revealing that the sector shrank last year for first time since the financial crisis, while sales of electric vehicles doubled to 2mln, JPMorgan sees obvious effects for JMAT.
“We believe the structural growth headwinds will likely become more visible from next year as the EV penetration is likely to see a significant inflection in EU,” JPM's analysts said, with the sector also battling the “cyclical downturn” in US and EU truck markets.
The analysts slashed the FTSE 100 company’s target price to 2,850p from 3,400p after the shares spiralled downwards more than 10% last week on the back of a half-year update where debt was higher than expected and full-year guidance was rejigged due to delays opening a factory in Poland.
Looking ahead, electric vehicles are a potential growth catalyst for Johnson Matthey, but while there seemed to be some progress with the new eLNO electric vehicle battery materials, JPM said “any customer confirmation is unlikely till 2022 at the earliest”.
Shares slumped 1% to 2,907p in Thursday morning trading.