Business & Investment

Flowtech Fluidpower – Ready to exceed target price

In late April of this year, I Flowtech Fluidpower (LON: FLO) @ 105p sets a target price of 130p achieved after 7 weeks.

After hitting a high of 135.5p and surpassing the 130p mark from most of June to mid-July. After that, they returned to only 115p.

They were back at 128p on Monday prior to yesterday’s group trading update, before falling back to just 122p.

Time for another run upwards

It is at this level that I consider the stock to exceed its previous highs and be ready for the next run.

As a reminder, the company is a group of fluid power specialists. Throughout the UK and Northern Europe, we are an important supplier of such products and solutions needed by many business sectors.

It is an important participant in the fluid power chain and helps keep the industry moving.

So what is fluid strength

Fluid power uses a fluid, either a hydraulic liquid (oil or water) under pressure or a pneumatic gas (compressed air), to generate, control, and transmit power. This is the business of this group. Work with a variety of partners, suppliers and, of course, their customers.

Entering the market in 2014, the group operates in approximately 19 locations, employs more than 620 people and supplies more than 500 brands.

In terms of sales / employee breakdown, the company generates 77% of revenue in the UK and Ireland and involves 91.2% of its employees. In Europe, which accounts for 21% of sales, it accounts for 8.5% of all employees. In other regions, 0.3% of employees process 2% of revenue.

Latest information on yesterday’s transaction

In yesterday’s Trading Update, the company’s management said:

“We continue to make good progress in all aspects of implementing our long-term strategy and continue to focus on addressing the short-term challenges posed by supply chain issues and inflationary pressures.”

In the six months to the end of June, Group revenues were up 18.9% to £ 55.3m, while Group net liabilities were down £ 1.3m to £ 13.3m.

Encourage trade, but supply chain annoyance?

The statement required some attention to it.

“”Current trading remains promising. However, it is difficult to assess both the potential short-term demand from customers and the ongoing and widely experienced disruption in the supply chain. Overall, we expect 2021 results to be in line with market expectations. “

Broker’s view

Group NOMAD Zeus Capital analysts Andy Hanson and Rachel Birkett said the group’s earnings by the end of December increased from £ 95.1m to £ 104m, with a profit of £ 4.7m (£ 0.3m) and per share. 6.1p (0.4p).

In the future, the rate of return will improve next year, with sales of £ 110.4m, pre-tax £ 8.7m and a profit per share of 11.3p. It’s still early, but in 2023, sales will be £ 113.9m, earnings will be £ 9.5m and earnings per share will be £ 12.4p.

David Buxton, research director of group broker finnCap, made a similar estimate and actually modified the 175p price target for equities.

My view

When we announce our interim results on Tuesday, September 7, we need to wait for what the company is trying to say.

But in the meantime, I’ve seen the share rise again as 135p-140p easily reach the goal.

(Profile 23.04.21 @ 105p sets a target price of 130p *)

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Flowtech Fluidpower – Ready to exceed target price Flowtech Fluidpower – Ready to exceed target price

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