AB Dynamics (LON: ABDP) shares were upgraded to Hold from Underperform by Jefferies this week, with the firm also setting a price target of 1,620p on the stock.
The firm pointed to a fairly upbeat set of interim results and resilient long-term fundamentals.
Despite solid first-half results in April, sentiment around the testing and simulation specialist has been weighed down by a broader automotive industry slowdown and concerns related to the NHTSA, the analysts wrote.
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The company reported an 11% rise in revenue to £58 million and a 22% jump in statutory operating profit for the six months to Feb. 28, reflecting “strong growth across all three sectors” and improved operating leverage. Adjusted earnings per share rose 20% to 37.0p.
Jefferies said that while these numbers were encouraging, the stock had de-rated, with investor sentiment dampened by sector-wide challenges. Nonetheless, it highlighted that auto R&D forecasts remain healthy, and absolute R&D tends to decline only slightly in downturns.
AB Dynamics continues to deliver on its medium-term growth strategy, including a recent acquisition and product development aligned with regulatory tailwinds and technology shifts.
The group said trading remained strong, and it expects to meet full-year profit expectations despite macroeconomic uncertainty and new international trade barriers.
On the valuation side, Jefferies said it sees AB Dynamics’ current multiples as fair, “especially if we factor in possible upside from medium-term targets.”
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