Broker tips: Halma, Asos, Johnson Matthey

(Sharecast News) - Barclays upgraded Halma to 'overweight' from 'equalweight' on Tuesday and lifted its price target on the stock to 2,650.0p from 2,425.0p. "Against an expected declining interest rate backdrop later this year, bond proxy, high quality, EPS compounders are likely to come more into focus," said Barclays.

In UK Capital Goods, two names fit this criteria, Halma and Spirax Group, it said.

Barclays said that based on its comparative framework its relative preference is for Halma, hence the upgrade.

Shore Capital has reiterated its 'sell' recommendation for fast fashion retailer Asos on Tuesday, saying the company qa "paddling upstream" with ongoing sales pressure, high debt levels and competitive threats.

Ahead of the company's first-half results, due on 17 April, Shore Capital cut its revenues forecasts for the year ending 31 August by 4% to £3.08bn, representing a 13% drop year-on-year, near the bottom end of company guidance for a 5-15% decline.

"Our cut is driven by ongoing sales pressure, which we perceive will have persisted beyond H1 FY24F, so leaving more to do in H2 than originally expected and what may be achievable," the broker said.

Meanwhile, Shein's continued market-share gains in the UK continue to be a threat for Asos, Shore Capital said. While Shein faces its own headwinds and concerns around disclosures, which could impact its plans for a stock-market debut on Wall Street, it could possibly float in London, the broker suggested.

"Whilst the progress in supporting profit is encouraging, ASOS is still suffering with its top-line sales, and continues to be restricted by its debt levels," Shore Capital said. "It is promising that restructuring plans are underway and also to see unchanged margins guidance during the recent trading update, however, overall, this space remains tough, and visibility is low, in our view."

The broker said its fair-value estimate for Asos's shares suggests more than 20% downside to current levels, justifying the 'sell' stance.

Analysts at Berenberg raised their target price on diversified chemicals business Johnson Matthey from 1,650.0p to 1,800.0p on Tuesday but said the performance of its shares will likely depend on three factors.

Firstly, Berenberg said the rate of decline in its legacy autocatalysts and platinum group metal-refining business looked set to be a major part of the investment puzzle, as was the group's self-help and portfolio management, and the success of its growth segments - catalyst technologies and hydrogen technologies.

The German bank stated that prospects for the first two factors have "improved markedly" since its downgrade of the stock on October 2023. However, it also noted that the late-cycle nature of the legacy sales base in the catalyst technologies segment and well-publicised headwinds to the adoption of green hydrogen, left it "more cautious" about the development of Johnson Matthey's growth segments over the next year.

"The over 10% increases to our EPS estimates for FY25 and FY26 reflect: (i) the £250.0m buyback announced following notice of divestments; and (ii) higher margins in JMAT's Clean Air segment. Shares trade on 6.5x 2025 EV/EBITDA," said Berenberg, as it reiterated its 'hold' rating on the stock.