Weir Group PLC (LSE:WEIR) shares are trading at an attractive level as markets have underappreciated the extent of its transformation, analysts at Berenberg reckon.
The investment bank initiated coverage with a 'buy' rating and a 2,060p price target that offered 28% upside to the last close price on Monday.
Analysts said the FTSE 250 mining technology company has undergone significant portfolio transformation in recent years.
"The Weir of today displays the characteristics of a high-quality UK industrials business with a high level of aftermarket revenue (75%), expanding margins (target: 17%), inflecting returns on invested capital, structural and cyclical end-market growth, improved cash generation, a strengthened balance sheet and a compelling ESG story."
The analysts said they think sustainability trends "can drive organic revenue growth in the mid- to high single digits over the long-term as 1) Weir’s technology reduces customers’ energy consumption, water usage and waste – all areas of increasing importance to mining customers; 2) Weir products process commodities (copper is its largest exposure) that will play an important part in the decarbonisation of the economy".
With shares having fallen by 19% versus the sector at +9% so far this year, they are trading at a 22% discount to the UK industrials sector, are this is seen as "an attractive entry point".