Berenberg starts coverage of Xaar at 'buy', shares spark

(Sharecast News) - Berenberg started coverage of Xaar on Friday with a 'buy' rating and 160p price target. It pointed out that Xaar is the only global independent industrial inkjet printhead designer and manufacturer.

"Through recent acquisitions it has broadened its portfolio of associated systems to speed up the integration of its printheads by OEM customers," it said. "It has unique patented technology and production knowledge built up over three decades that differentiates it from its larger Japanese conglomerate competitors."

Berenberg said Xaar's technology is helping to drive the analogue-to-digital conversion of printing processes across multiple new and existing end-markets, helped by its unique ability to inkjet print ultra-high viscosity fluids and inks.

"After several years of external headwinds delaying new end-markets from adopting Xaar's disruptive technology, we now have visibility on the revenue inflection point," the bank said.

Berenberg said recently entered new end-markets are gaining revenue traction.

It noted that Xaar's printheads and inkjet technology is used across five core end-markets: ceramics and glass, coding and marking/direct-to-shape, wide-format graphics and labels, 3D printing and advanced manufacturing, and packaging and textiles.

"The group's legacy end-markets have stabilised in recent quarters, although we do not expect the ceramic tile decoration market to see any recovery until at least FY28E," the bank said.

"Recently entered new end-markets, such as wax printing for jewellery manufacturing and digital printing of textiles, have a strong growth outlook as printing machines recently launched by Xaar's OEM customers gain traction on quick economic payback."

The bank's base case assumes revenue from these two markets grows at a 21% compound annual growth rate FY24-FY29.

At 0822 BST, the shares were up 7.3% at 125.50p.