UniCredit Reiterates BUY Rating on Krones, Target Price Reduced

October 07 00:00 2011

LONDON, October 7 (RainbowNewsLine.com): Analysts at UniCredit’s Equity Research have reiterated their BUY rating on the shares of Krones (ETR: KRN). The target price has been reduced from €62.50 to €54.00.

Krones is a market leader in an attractive niche segment and it has still room for increasing profitability with a strong balance sheet and net cash position. There are more reasons to support analyst’s BUY recommendation.

  • Current year revenues exceed the 2008 record level of €2.38 billion.
  • Krones is still under process of hiring new employees and train them in their jobs, which leaves room for efficiency increase next year.
  • On 27 July, Krones raised its 2011 sales growth guidance from the previous 7%-10%, to the current “clearly more than 10%”.
  • Due to major holiday period in July/August, Q3 naturally delivers lowest orders; therefore, seasonality is likely to cause ‘qoq’ declines.
  • Krones’ exposure to the food segment will protect the company against stronger sales declines, the increased macro and cycle risks might still slow down the sales growth and making it vulnerable to macro and cycle risks.

The analyst believes that Krones stock might witness a rally if pricing discipline improves within this sector, optimum utilization of company’s operations and resources and if all new time high is recorded in the sales. The shares have experienced a 12-month high price was of € 59.40 and low price of €35.55. Moreover, the cost of equity stood at 6.5%.

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