Johnson Matthey's Second Half Beats Consensus; Strategy Update Undramatic

Narrow-moat Johnson Matthey reported second-half EBIT of GBP 263 million, down 25% but ahead of the Vara consensus. Fiscal 2023 guidance implies EBIT of around GBP 490 million-GBP 560 million, or about a 5% decline year over year, using the midpoint. The strategy update seems more evolutionary than revolutionary to us, which is likely why shares are down around 5% intraday, worst of the group. Our fiscal 2023 EBIT estimate is currently within the guidance range at GBP 508 million, so we don’t expect to make a material change to our GBX 2,200 fair value estimate. At current levels, the shares look fairly valued.