Johnson Matthey PLC (LON:JMAT) was downgraded to ‘hold’ by Deutsche Bank for two key reasons.
Analysts are concerned that there will be an increasing global ramp-up of the supply of cathode material for electric vehicle batteries closer to 2024, when the FTSE 100 company is targeting the commercial launch of its novel ‘eLNO’ cathode material.
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This will unfavourably shift the “crunch point” of price pressure in the industry, the analysts said.
Secondly, a delay in benefits from growth investments made in the group’s Clean Air catalytic converter division is expected as the analysts foresee automotive production failing to meaningfully pick up over the short/medium term.
On top of that, there is potential for delayed phasing of some emission standards.
On the plus side, the group has a “well-run asset base”, including a high degree of variable costs in the Clean Air arm, a strong balance sheet and management is focused on organisational efficiencies, as was highlighted in the recent annual results.
The rating was downgraded from ‘buy’ with the target price cut to 2,200p from 2,700p versus the last close price of 2,043p.
The shares fell initially on Friday morning before climbing to 2,088p by mid-morning, a rise of more than 2%.