Broker tips: Anglo American, Qinetiq, Kitwave

(Sharecast News) - Analysts at Berenberg hiked their target price on diversified mining outfit Anglo American from 3,600.0p to 3,800.0p on Monday, stating the firm has "still got it". Berenberg said Anglo American had outperformed on "a difficult day in the markets" amid Russia/Ukraine tensions on outgoing chief executive Mark Cutifani's last set of results before he hands over the reins to Duncan Wanblad.

While the German bank said the results themselves were "a positive surprise" to the market-driven by a dividend beat at $4.19 per share, versus consensus at $3.65, and better net debt than expected thanks to working capital, the earnings call and management roundtable also highlighted that Anglo was in "strong shape" to deliver on growth from its compelling portfolio of assets and has self-help options to improve divisions which have previously struggled.

"We remain 'buy'-rated, and lift our price target to 3,800.00p per share, through an increased enterprise value/earnings before interest, tax, depreciation and amortisation multiple to 6.4 times (from 5.8 times), reflecting production growth and existing operational upside not in our numbers," said Berenberg.

JPMorgan Cazenove upgraded Qinetiq from 'underweight' to 'neutral' on Monday as it said Russia's invasion of Ukraine had "fundamentally changed" the landscape for the European defence sector.

"First, European defence spending is now going to be much higher than previously expected, as shown in Germany's weekend announcements," it said.

Germany said over the weekend that it would lift defence spending to 2% of economic output. It will also invest €100bn in a special fund this year to modernise its military and send weapons to Ukraine.

JPMorgan, which lifted its price target on Qinetiq from 260.0p to 320.0p, said that given Russia's actions, it would not be surprised if US President Biden and Congress now seek an even bigger increase in defence spending.

"Second, with regard to the sector's ESG credentials, more investors may accept that 'defence' is needed to preserve peace and democracy, driving a re-rating of EDS," JPM said. Nevertheless, it expects ESG and defence to remain a complex topic which will require further discourse.

Analysts at Canaccord Genuity slightly raised their target price on wholesale Kitwave from 240.0p to 255.0p on Monday, stating a "positive start" to the 2022 trading year had driven further upgrades for the stock.

Canaccord Genuity said Kitwave had delivered "a solid set of FY21 results", in line with upgraded forecasts, as trading rebounded strongly across the second half as Covid-19 pandemic trading restrictions eased and resulted in annual group revenues of £380.7m and adjusted underlying earnings of £15.1m.

The Canadian bank, which has a 'buy' rating on the stock, highlighted that Kitwave had navigated "the challenging backdrop of the pandemic and widespread supply chain/availability issues" well, given its in-house established delivery fleet and strong relationships with its large network of branded suppliers.

Canaccord also said trading across the start of 2022 had been slightly ahead of expectations and virtually back at pre-pandemic levels, leaving its analysts encouraged that Kitwave was carrying "strong momentum" as trading conditions continue to normalise, despite ongoing inflationary cost pressures on wages/fuel.

"The positive start to the year prompts a further upgrade to forecasts, which were recently upgraded for the acquisition of MJ Baker. We see scope for the shares to re-rate further following today's positive update and outlook, and believe they look good value on just 9.5x CY22E PER," concluded Canaccord.