On Tuesday, HSBC announced an increased price target for TT Electronics Plc. (TTG:LN) (OTC: TTGPF), raising it to GBP2.80 from the previous GBP2.40 while retaining a Buy rating on the stock. The adjustment comes as the analyst believes TT Electronics presents the highest implied upside within the UK Industrial sector they cover.
The revision in the price target is a result of an overhaul of estimates and an update to the sum-of-the-parts (SOTP) valuation, leading to a new target price of 280 pence, up from 240 pence.
TT Electronics is currently positioned as the most undervalued stock in the analyst's UK Industrial coverage universe, trading at 5 times its estimated 2024 earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), 8 times its price-to-earnings (PE) ratio, and with a free cash flow (FCF) yield ranging from 9% to 13%.
The analyst highlighted the company's favorable risk-reward profile, noting that TT Electronics has a driven management team that has established new internal guidelines aimed at achieving a 12.0% margin.
Additionally, the company plans to focus on aggressive deleveraging in the coming years. While acknowledging that TT Electronics may be a "show me" case, the analyst suggests that investors capable of engaging with smaller market cap stocks should consider taking a closer look at the company's potential.
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