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Liberum initiates coverage on XP Power at 'buy'

By Iain Gilbert

Date: Thursday 06 Aug 2020

Liberum initiates coverage on XP Power at 'buy'

(Sharecast News) - Analysts at Liberum initiated coverage on electrical component manufacturer XP Power at 'buy' on Thursday, stating that an acceleration in earnings growth would drive a re-rating in the group's shares.

Liberum expects XP Power's earnings growth to accelerate from its 9% five-year average to 15%, which its analysis showed should drive a re-rating towards quality peers.

"Our peer group analysis shows how stronger earnings growth is the key for XP Power to re-rate towards quality industrials and more in line with its high EBIT and FCF margins," said Liberum.

Organic earnings growth was projected to increase 2.5 times to 11-12% as 350 basis points of margin expansion between 2019 and 2022 finally converts its leading sales growth into earnings.

Strong free-cash-flow alongside should also drive further growth through bolt-on mergers and acquisitions.

"On our estimates, that equates to a target price of 5,130p, and with 20% upside to the current share price, we initiate on XP Power with a 'buy' recommendation," said the analysts.


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