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Investing.com - Citi upgraded WEIR Group Plc. (LON:WEIR) (OTC:WEGRY) from Neutral to Buy on Monday, while significantly raising its price target to GBP29.00 from GBP21.30.
The upgrade is based on two key factors, with Citi highlighting Weir’s exposure to the mining sector as offering potential for earnings growth despite a soft macroeconomic environment. Citi’s proprietary mining survey indicates positive mining capital expenditure intentions, with mining production expected to remain resilient.
Favorable commodity prices, particularly in copper and gold, are supporting the positive outlook for Weir’s mining-related business, according to the research note from Citi.
The investment bank also pointed to Weir being "structurally undervalued" for a company of its quality, noting that its multiple has not yet fully reflected its self-help initiatives. Citi’s analysis suggests approximately 15% re-rating potential for Weir based on its return on capital employed (ROCE) and free cash flow margin profile.
Citi believes robust relative growth could serve as a catalyst for Weir, with the higher price target justified by the bank’s deeper analysis into the company’s valuation supporting a higher multiple.
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