Essentra PLC (LON:ESNT) is doing better amidst the COVID-19 pandemic than Jefferies feared and has been upgraded by the investment bank.
Jefferies new ‘buy’ rating, up from ‘hold’, comes with a 360p price target – compared to a current price of around 291p.
Analyst Andy Douglas pointed to growth opportunities in the components and filters businesses, whilst he added that the packaging division has recovery potential.
“Having navigated its way through COVID-19 challenges well, Essentra has proven to be less cyclical than we feared, a number of risks have not emerged, and we believe the group is well-positioned for medium-term recovery and growth,” the analyst said.
“However, we believe the market neither fully appreciates nor appropriately values the medium-term growth opportunities and the EBITA margin potential.
“In some cases, we do believe many of these opportunities are well-understood. We expect sentiment to change as the recovery comes through/momentum shifts, and look for the shares to re-rate.”
Last month, Essentra told investors that full-year revenue and adjusted operating profit are going to be around the current consensus.
In the six months to June, revenue slid 11% to £448mln, while pre-tax profit slumped 85% to £8mln mostly due to the disposal of various businesses in the first half of 2019 and temporary inefficiencies caused by the pandemic. Net debt rose 23% to £297mln.