Victrex’s Volume Outlook Remains Solid but Margin Headwinds Increasing; Shares Undervalued

Narrow-moat Victrex reported first-half fiscal 2022 underlying profit before tax of GBP 48.2 million, up 3% over fiscal 2021 or 10% in constant currency. After 16% volume growth in first-quarter fiscal 2022, second-quarter growth was only 3%, but this was mainly due to a tough comparable. Shares are down 7% intraday, but the whole sector is down about 3%-4%. We will likely trim our margin estimates on our expectation for continued cost inflation but we don’t expect to make a material change to our GBX 2,250 fair value estimate. At current levels, the shares look undervalued.