EUR 513.00 For Business Accounts Only

Norcros (NXR LN, BUY, T/P 260p) - Materially undervalued

After eight years of consecutive revenue and EBIT growth, the resilience demonstrated by Norcros is not reflected in its share price. The following remain in its favour: 1) the strong balance sheet will continue to finance an acquisition strategy and growth; 2) 43% of revenues are sourced overseas, giving insurance against any downturn in the UK; 3) forecast Lfl revenue growth in South Africa of over 5% and 4) it trades on a FY18 PE rating of 6x and offers a dividend and free cash flow yield of 4% and 10% respectively. We initiate coverage, following the recent positive trading update with a buy recommendation and price target of 260p, representing 45% upside. Even then, the FY18 PE rating is still only 8.8x.