【出版时间及名称】：2010年1月英国电力设备行业研究报告
        【作者】：汇丰银行
        【文件格式】：PDF
        【页数】：32
        【目录或简介】：
Strong lead indicators of price and
volume suggest risk is falling;
multiples don’t
􀀗 We raise our estimates and price
targets, believing reduced risk should
see multiples grow
􀀗 Reiterate OW(V) on PFL & upgrade ECM
to OW(V) from UW(V). Increase TP for
PFL (190p to 230p) & ECM (110p to 220p)
Headwinds become tailwinds
We have outlined in a number of bearish notes on business
services how the falling value of sales may wipe out much
expected operational gearing, as it has before at this point in
the cycle. Indeed, in the last recovery, the distributors
Premier Farnell and Electrocomponents saw positive gearing
fail to materialise largely because of the falling value of
sales. That has left many sceptical of management, strategy,
or the argument that the business models are inherently
operationally geared.
However, we think the stocks look set to benefit from rising
volumes with rising prices. The inventory-to-sales ratio at
distributors of electrical and electronic components has fallen
relative to sales, which is driving up prices. That may not last
forever, but it should add to gearing in the recovery. For
distributors, rising unit prices provide geared profit growth,
largely because SG&A costs are volume-related, not valuerelated.
Also, some distributors will make a turn on older
inventory bought at lower prices but sold at newer, higher
prices. As a result, we have raised our estimates materially and
are at or above consensus. Given the discounts seen in multiples
to other “geared cyclicals”, we believe that if
Electrocomponents and Premier deliver in this recovery,
multiples will rise as investor scepticism abates.
Both Electrocomponents and Premier have been blighted by
price deflation, which now appears to be over. We increase
our estimates and target prices for both the stocks and
upgrade ECM from Underweight (V) to Overweight (V). We
have increased our target price for PFL from 190p to 230p
and ECM from 110p to 220p as a result of these upgrades.