Jefferies analyst David Farrell maintained a Hold rating on XP Power today and set a price target of p900.00.
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David Farrell has given his Hold rating due to a combination of factors including the recent Investor Seminar, which highlighted XP Power’s ambition to return to its pre-pandemic financial metrics. The company aims for a 10% organic revenue growth, a 20% EBITA margin, and a return on capital employed of over 20%. Despite these ambitions, the current momentum is seen as weak, with the book-to-bill ratio in the second and third quarters still below 1.0x.
Furthermore, while XP Power operates in a growing $6.5 billion critical power market, with expectations of a 7% growth rate, there remains a risk to consensus forecasts if order intake does not improve. The company plans to outperform the market by expanding its product portfolio and increasing its share of key accounts, but the early stages of this growth strategy warrant a cautious approach. Therefore, Farrell’s Hold rating reflects a wait-and-see stance as the company works to solidify its growth trajectory.