Analysts at the broker said that while the FTSE 250 engineering company had seen an outstanding performance from its Critical Engineering division, which delivered organic growth of 6% in the period, they saw “lIMIted potential upside” from its Precision Engineering arm, which accounts for 60% of the group’s earnings.
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“We expect organic growth [for the Precision division] to slow from the 8% in [the first half] to 4.5% in [the second half] as comps get much tougher, and this will also be the case in [the first half of 2019]” the broker said.
“We therefore see only small upgrade potential for next year. Continued recovery in Critical would offer upside risk to our estimates, but we do not have the confidence to extrapolate one strong set of results. In addition, we also see some risk to the 4.3% organic growth consensus is forecasting for Precision next year,” they added.
Despite the downgrade, the broker left its target price for the firm unchanged at 1,275p.
In its half-year results released on Tuesday, IMI reported a 16% increase in pre-tax profits to £113mln compared to the first half of 2017, while revenues climbed 8% to £915mln and the dividend was upped 3% to 14.6p.
In mid-morning trading Wednesday, IMI shares were down 1.6% at 1,222p.