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On Tuesday, Deutsche Bank (ETR:DBKGn)’s analyst Thomas Elgar revised the price target for Bodycote Plc (LON:BOY:LN) (OTC: BYPLF), a leading provider of heat treatment and specialist thermal processing services, to GBP7.00 from the previous GBP7.50. Despite the adjustment, the firm maintained its Buy rating on the company’s stock.
Elgar’s assessment reflected a cautious stance on Bodycote’s market conditions as the company enters 2025. He noted that the company’s markets are currently challenging, prompting an update in estimates and a shift to a new reporting structure. The analyst projected a relatively unchanged to downward trend in the year ahead, with an expected EBITA of GBP125 million compared to GBP129 million in the fiscal year 2024.
However, Elgar indicated potential for improvement later in the year, citing a likely resurgence in the aerospace sector and more favorable comparisons in the second half of 2025. He emphasized the significance of the year’s trajectory, especially when looking further into the future.
The analyst also pointed out Bodycote’s current valuation, which at December 2025 was trading at 12 times price-to-earnings ratio, compared to a long-term average of 15.5 times. Elgar suggested that the stock’s valuation already accounted for the anticipated delay in recovery. He highlighted the company’s projected core margins of 18% in the fiscal year 2025 as evidence of Bodycote’s underlying quality.
Elgar concluded his commentary by addressing the company’s balance sheet, suggesting that Bodycote would be effectively deleveraged by the fiscal year 2027, with a debt-to-equity ratio framework of 0.5 to 1.5 times. He mentioned that while the immediate focus is on organic delivery, Bodycote’s narrative still holds significant balance sheet optionality.
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