Reliance Worldwide provided what Morgans assesses to be a strong trading update, with first half earnings (EBITDA) well ahead of forecasts.
All regions performed well with higher volumes and operating leverage driving margin expansion, explains the broker.
Management cautioned against extrapolating the first half sales performance for the full year, given the ongoing uncertainty in all markets due to covid-19.
In addition, copper cost increases and foreign exchange are potential headwinds in the second half, notes the analyst.
The company also advised cash generation led to a -$76m reduction in net debt during the period.
Following upgrades to earnings, the Hold rating is maintained and the target price is increased to $4.62 from $4.08.
Sector: Capital Goods.
Target price is $4.62.Current Price is $4.37. Difference: $0.25 – (brackets indicate current price is over target). If RWC meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges – negative figures indicate an expected loss).
