Leonardo: with 'unjustified' discount, Oddo upgrades stock

(CercleFinance.com) - Oddo BHF has upgraded its "neutral" rating on the Italian group aeronautics and defense Leonardo share to buy its advice, with the stock currently blossoming in Milan (+13% yesterday; +6% this morning).

After a good end to 2018, the share's discount is "impossible to justify", according to analysts. Set at 12.5 euros, their new target price for the share represents upside potential of around 25%.

After a pitiful 3rd quarter of 2018, which reintroduced an element of doubt about the speed of recovery in Leonardo's profitability, its research note says, the publication of Q4 reuslts enables the group's new management team to successfully enter into its first full year ahead of all targets, Oddo points out.

It adds that the progress made in 2018 add credibility to targets set in the plan (by 2020, ed.) implemented by Alessandro Profumo and no longer justify the share's current discount relative to European Defense peers. Indeed, Leonardo is trading at an EV/EBITDA of 7.2x in 2020, against 9.3x for the sector. Meanwhile, P/Es are 7.6x and 13.1x times, respectively.

The broker believes that the plan's smooth running now justifies a re-rating for the stock (i.e. a further rise, ed), Oddo BHF concludes.



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