Source: Sharecast
Berenberg kept its 'hold' rating on the stock, arguing the shares already balance improving outer‑year demand with a valuation that sits in line with international peers.
The German bank stated that the stock has traded in a tight range since May as ownership shifts toward investors seeking semiconductor WFE exposure. It said the interim pre‑close update on 13 October showed continued strong momentum in advanced technologies, where compound‑semiconductor plasma system orders jumped 125% year‑on‑year, including a large April order.
However, it also stated capacity constraints at the Severn Beach site mean these orders will convert more slowly, supporting FY28 revenue growth rather than near‑term numbers. As a result, the broker lifted FY27 adjusted earnings per share estimates by 1% and FY29 by 4%, while its valuation move to CY28 forecasts alone drove the target‑price reduction.
Across the group, first‑half trading was stronger than expected - order intake rose 44%, revenues grew 8%, margins improved by 100 basis points, and cash generation was solid. Guidance for FY27 was unchanged.
Berenberg expects only modest consensus changes, noting execution risk into the seasonally weighted Q4. It said the year‑to‑date re‑rating left the shares fairly valued at 27x FY27 earnings, falling to 23x in FY28.
Jefferies upgraded Pennon to 'buy' from 'hold' on Wednesday but cut its price target on the stock to 380p from 500p as it said uncertainty left by the lack of updated return on regulated equity targets after last week's rights issue has seen shares sell off around 20% to a level below book equity RCV/per share.
Jefferies said "this provides a margin of safety" and stated adequate returns with small improvements should suffice for shares to re-rate towards 1x over time.
"We think management's plan is credible and see scope for outperformance against low expectations," Jefferies added.