Jefferies upgrades IMI on prospects under new CEO

7th Apr 2014 10:37

Jefferies has lifted its stance on engineer IMI from 'hold' to 'buy', saying that improvements should follow the company's 'new regime'.The broker said that the stock trades in line with the UK industrials sector despite the business delivering above-average margins, having a "decent" balance sheet and "first-rate management".This sector-average valuation is expected to "unwind", Jefferies said, as it hiked its target price from 1,590p to 1,750p.It believes newly-appointed Chief Executive Mark Selway will bring "considerable change [...] for the better"."We expect a pick-up in sales growth and the balance sheet to be put to use (selectively), but the scope for medium-term operational improvement and improved cash generation cannot be under-emphasised. "This may come with less [...] margin growth than some are hoping for, but there is scope for attractive absolute profit growth."The stock had erased earlier gains and was trading down 0.4% at 1,546p by 10:48 on Monday morning.BC