Berenberg lowers target price on Judges Scientific

(Sharecast News) - Analysts at Berenberg slashed their target price on Judges Scientific from 10,600.00p to 7,900.00p on Monday following the trading update last week. In Berenberg's view, Judges Scientific's profit warning contained within the update was not "wholly unexpected" given the outlook statement from its FY24 results release, uncertainty caused by proposed US research funding changes and peer commentary on the state of key end-markets.

With that said, in addition to the end-market challenges, Judges Scientific also highlighted internal operational issues, which Berenberg expects will raise some concerns among investors and could put near-term pressure on the stock.

However, the German bank highlighted that it backs Judges' management team to take the necessary steps to rectify this and retained its 'buy' rating on the shares.

"We believe the underlying Judges buy-and-build business model is attractive for investors, while the underlying structural growth in its key end-market niches also underpins a strong investment case. Current markets are clearly difficult, but growth should normalise on a 12- to 24-month view," said Berenberg.

We understand investor concerns about the increased volatility of earnings in recent years versus history and several other challenges related to internal operations which are inconsistent with Judges' history and might warrant more caution and a discount on valuation versus history, certainly in the near term as these issues are worked through. That said, we maintain our view that the group's model is not broken and that market recovery and management action, alongside a potential Geotek coring contract (not currently in numbers), could provide substantial upside risk to 2026 forecasts."

Berenberg added that at a 22.6x 2025 price-to-earnings ratio and 16.9x enterprise value/underlying earnings, it still sees value but acknowledges that it "could take time to play out".

Reporting by Iain Gilbert at Sharecast.com