HSBC upgrades Electrocomponents to 'buy' as sentiment shifts

16th Nov 2016 08:36

(ShareCast News) - HSBC upgraded Electrocomponents to 'buy' from 'hold' and lifted the price target to 430p from 240p as it pointed to the self-help story.The bank pointed out that investor sentiment towards the company has shifted."A company that had been perceived as being doomed to dwindling returns, retreating from internet competition, has become a self-help story. Electrocomponents has refocused its product offering, restructured its cost base, simplified its discounts structure, and addressed its purchasing."As a result, the group is now less exposed to currency fluctuations and is striving to buy cheaper, hold for less and sell at a better price, HSBC said."This requires a sharp focus on what the customer wants, and meeting those demands. The success thus far is impressive, necessitating that we increase our numbers."The bank upped its pre-tax profit estimate for 2018 by 24% to £128m.HSBC said that given Electrocomponents has years of under-trading to reverse, as long as the economy is supportive, it can continue to improve.At 0952 GMT, the shares were up 2.4% to 373.90p.