Citigroup has downgraded car catalyst provider , saying the share price, up more than 20% over the last month, has caught up with events.
Citigroup said the share price spurt was prompted by better than expected full-year guidance at the time of the company's interim results, a bottoming out of platinum prices and continued sterling weakness.
Citi's 2009 and 2010 earnings estimates remain 5% and 13%, respectively, below market consensus, with the US bank concerned about the continuing deterioration of the market for new cars; Johnson Matthey's car catalyst operations account for around 35% of the company's earnings before interest and tax.
Though the stock has been downgraded from "buy" to "hold", Citi's price target of 1250p has been left unchanged.
"At 15x calendar 2009E PER the stock is back to its long-term average valuation and we believe no longer appears to be a good value on a relative basis given the current earnings challenges. We also raise the Risk rating to Medium to reflect the short-term risks in supplying the auto industry," the bank's analyst Sophie Jourdier said.
