Barclays Capital believes Johnson Matthey PLC (LON:JMAT) has been harshly penalised by the negative sentiment to its core catalyst division caused by the drive towards electric vehicles, and has upgraded its rating for the specialty chemicals firm.
In a note to clients, BarCap’s analysts said: “On almost any metric JM is amongst the cheapest chemical stocks in Europe despite its late-cycle demand profile.”
They added: “Extreme negative sentiment in the core catalyst division is largely to blame but this provides a compelling opportunity for investors willing to stomach some near-term volatility in the pursuit of long-term gains.”
READ: Johnson Matthey sees muted underlying profit growth
The analysts noted: “Today's share price seems to be assigning an improbably low value to JM's growth projects despite a long track-record of sector-leading returns - highly punitive for a company re-investing a considerable portion of its cash flow.”
And they concluded: “With the downside limited and sentiment at a very low level we upgrade” to ‘overweight’ from ‘equal-weight’ with an increased target price of 3,450p, up from 3,380p.
In late morning trading, Johnson Matthey’s FTSE 100-listed shares were 0.7%, or 20p higher at 2,890p.