ALS shares lift as Morgans analysts upgrade rating
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The news: Morgans analysts upgraded their rating and target price on ALS, as the laboratory testing provider expects to benefit from recoveries in the life sciences and commodities sectors.
The numbers: The analysts lifted their rating on the stock from 'hold' to 'add' and increased their target price from $13.70 to $15.00.
ALS shares rose at market open on the ASX, trading 2.6% higher at $13.65 by 10:35am AEST. In the last 12 months its share price has risen 4.57%.
ALS, which is due to report its full-year results next week, previously confirmed that its NPAT will be at the lower end of its guidance range of $310 million to $325 million. Morgans analysts forecast full-year EBIT of $474 million and NPAT of $312 million based on a recent trading update from the company.
The context: The analysts flagged that a "sector-wide profitability recovery" was underway in the testing, inspection and certification industry, with ALS' competitors in the sector guiding for a margin expansion through the 2024 calendar year.
They also noted that as gold and copper prices gathered pace, signs were pointing to a recovery in exploration spend, with ALS' excess capital from commodities used to fund capital-driven earnings growth in life sciences.
Holding more than a 50% market share in the geochemistry testing market, the analysts said ALS remained "highly cash generative" with "little chance of being competed away".
The source: Morgans research
