Chemring Group PLC (LON:CHG) has been downgraded to ‘equal weight’ from ‘overweight’ by analysts at Barclays after the bank said the shares were “fairly valued” following a price rally.
In a note on Wednesday, the bank also retained its 250p target price on the defence firm, adding that into the second half of the year the US election cycle was “likely to dominate news flow”, adding that stocks in the sector usually underperformed in these periods due to the political uncertainty around American defence spending.
READ: Chemring soars as first half beats expectations
Barclays also said that while the company’s first half results were “solid”, deferrals were possible in the second half and in 2021 and that cash outlay growth was expected to decelerate following a surge in the first half of the year as the UK and US defence departments increased payments in support of supply chain health during the coronavirus pandemic.
In its first half results last week, the Chemring reported an underlying pre-tax profit of £24.2mln, 144% higher than the prior year, while revenues surged 37% to £191mln.
The company said all of its businesses had remained open despite the pandemic, adding that it had seen a “significant reduction” in net debt during the year, which fell 28% to £60.6mln, as well as “strong operational cash generation”.
Shares in Chemring were down 0.2% at 247p in late-morning trading.