The Vitec Group upgraded as the picture starts to look brighter

0
33
Panorama of a city business district with office buildings and skyscrapers and superimposed data, charts and diagrams related to stock market, currency exchange and global finance. Blue line graphs with numbers and exchange rates, candlestick charts and financial figures fill the image with a glowing light. Sunset light.

After a turbulent 2019 and 2020, Berenberg thinks that The Vitec Group PLC is about to deliver improved organic growth this year.


The company has transformed its business from being a manufacturer and designer of camera support equipment into a provider of products and solutions for the high-growth content creation market.


The structural decline of the interchangeable lens camera market has forced the group to invest heavily in research & development (R&D), acquire strategically and explore high-growth adjacent markets.


Berenberg says COVID-19 turned the sector (and adjacent sectors) into a buyer’s market, with the result that Vitec is now serving several high-growth, high-margin industries.


The demand for 4K video technology “is a significant tailwind for the group” as Vitec holds around 80-90% of this market, on top of which, Berenberg notes smartphone photography is growing at a compound annualised rate of 12% as vlogging (on-screen blogging) grows in popularity, while demand for “on location” camera equipment and robotics is also increasing.


“We expect a step-up in organic sales to average c5-8% over the next three years,” the German broker said.


Margins are also recovering and are almost back to pre-pandemic levels, from a low point of around 3%. Berenberg is expecting margins to reach the mid-to-high-teens.


By Berenberg’s calculations, if they do exceed 15%, this potentially could feed through to an increase in 2023 earnings per share of around 17%.


The stock trades on a discount of almost 40% to its UK and global peer groups, prompting Berenberg to get off the fence and switch to a “buy” recommendation, with the target price rising steeply to 1,810p from 1,180p.

LEAVE A REPLY

Please enter your comment!
Please enter your name here