Vesuvius PLC weak as JPMorgan Cazenove cuts rating to ‘neutral’ from

() shares fell on Wednesday after JPMorgan Cazenove downgraded its rating for the engineered ceramics company to ‘neutral’ from ‘outperform’ on valuation grounds in its ‘Generalist Mid-Cap Year Ahead’ review.

The US bank did raise its target price for the FTSE 250-listed firm to 591p from 575p but, with the stock currently trading at 524p, down 2.7% on Monday’s close, its analysts tempered their recommendation following a strong recovery in the share price.

In the note to clients, the JPMorgan analysts said: “Management has a strong cost savings track record, though we expect the emphasis to shift towards growth and M&A from here. We see more upside elsewhere, with the group’s FY2 P/E now being 30% above its average since 2015.”

In its last update, back in November, Vesuvius said that demand in its end-markets had improved, albeit slowly, for both its Steel and Foundry divisions during Q3 2020, with the trends having continued into Q4.

On a constant currency basis, the group said its sales in Q3 were up 7.0% quarter on quarter and, although down 14.3% year on year, that was an improvement on the sales decline of 26.2% in Q2 compared to Q2 2019. The improvement in trading continued into October 2020 with sales down a more modest 7.5% compared to October 2019, it added.

Vesuvius concluded in November that they expected group trading profit (EBITA) for 2020 to be broadly in-line with current consensus market expectations.