Austal shares slip after Bell Potter downgrade
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More news: Austal shares dropped in morning trade after Bell Potter downgraded the Perth-based shipbuilder, calling the stock overvalued following a 142% advance over the last 12 months.
Shares were down 3.3% to $5.74 at 11:45am AEST.
Bell Potter hikes Austal price target by 26%, downgrades to 'hold'
The news: Bell Potter has hiked its price target on shipbuilding company Austal on expectations of a strong full-year result but downgraded the stock on valuation grounds.
The numbers: Bell Potter raised Austal's target price by 26% from $4.45 to $5.60, but downgraded its rating from 'buy' to 'hold' after the company's share price has risen 142% over the last 12 months. Austal shares last traded at $5.94.
Bell Potter expects the company's full-year revenue to reach $1.7 billion, a 13.5% uptick on the previous year, and earnings per share growth of more than 100%.
The context: Analyst Daniel Laing noted that Labor's re-election last month boosts the chances of a strategic shipbuilding agreement being signed and corresponding programs proceeding as planned and on schedule.
Laing said the higher valuation was supported by macro developments, such as geopolitical tensions and increasing military spend, driving increased investment in the defence sector.
Bell Potter, which upgraded Austal's revenue forecasts in FY26 and in future years by "low-single digits", also noted the company's "substantial net cash position" compared to its peers, and the stock's potential inclusion in the ASX 200 index in September.
What they said: "We remain positive on the long-term outlook for [Austal], considering the macro tailwinds and attractive growth profile, however, we are conscious of its current valuation," said Laing.
The source: Bell Potter research
