Electrocomponents upped to overweight as JP Morgan highlights permanent market share gains


Electrocomponents PLC’s (LON:ECM) trading bounced back faster than expected in its third quarter, according to analysts at JP Morgan, who on Tuesday upgraded the stock to ‘overweight’ from ‘neutral’.

In a note, the bank also hiked its target price for the FTSE 250 firm to 1,103p from 799p, saying that while the company’s 8% growth in like-for-like (LFL) sales over the quarter will be “offset by higher freight and other costs in the short-term”, these will be “temporary, whereas the market shares gains are likely permanent”.

READ: Electrocomponents returns to growth across all regions

JP Morgan’s analysts also said that the combination of the company’s digital offering in a post-coronavirus (COVID-19) world and an “emerging [mergers & acquisitions] strategy, with 3-4x the number of active M&A opportunities vs. 2 years ago” meant they expected the shares to re-rate higher.

The bank’s reassessment of Electrocomponents followed a trading update from the company on Monday in which it reported a return to revenue growth in all regions in the past quarter but higher costs.

For the four months to the end of January, like-for-like group revenues were up 8%, reversing a decline of 11% and 4% in the first and second quarters. However, because of elevated freight, labour and logistical costs due to the pandemic and Brexit, the industrial and electronics products supplier said its profit expectations for the year to end-March 2021 were unchanged.

Shares in the firm were up 4% at 980.5p in mid-morning trading.


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