RBC Capital gave a knock to Bodycote PLC (LON:BOY) shares on Friday, downgrading its rating to ‘sector perform’ from ‘outperform’ on valuation grounds.
The Canadian bank’s analysts, however, increased their target price for the FTSE 250-listed engineering group to 1,000p from 930p, with the shares currently trading at 925.50p, down 0.9% on Thursday’s close.
READ: Bodycote delivers a Christmas Eve expansion, with US$200mln acquisition of Ellison Surface Technologies
In a note to clients, the EBC analysts said: “Bodycote continues to show the relative resilience of its business supported by its Specialist Technologies. The Ellison acquisition (announced 24 December) should reinforce this.”
However, the analysts added: “Bodycote also has had the best share price performance in our coverage in the last 3 months (+40% vs European Industrials +20%) and as such we see a reduced level of upside and reduce our rating”.
Rotork downgraded too
Elsewhere among mid-cap engineers, RBC also cut its stance for Rotork PLC (LON:ROR) to ‘sector perform’ from ‘outperform’ also on valuation grounds.
The bank’s analysts said: “Rotork management has driven strong margin upside, and we forecast margins continuing to rise to 25% by 2022E.”
“However, with the shares +24% in 12 months (on EV/EBITA of 17x20E vs UK sector average 13x) more of this is now in the valuation - our price target is unchanged at 345p.”
The analysts concluded: “Organic growth will become more relevant as the margin expansion is better understood.”
Shares in Rotork edged up 0.03% to 328p in late morning trading.