The Vitec Group upgraded as the picture starts to look brighter

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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.


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