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Destocking hurt Victrex in the last three months of 2011 but since then demand for the company’s high-strength, heat-resistant plastics has recovered and sales volumes in the three months to March were higher than ever.
In the coming six months, the company, which does the bulk of its manufacturing in the UK and sells abroad, is likely to have to contend with a stronger pound. However, its huge margins should provide ample room for manoeuvre.
The company will also benefit from a ramp-up in production in the aerospace industry – each Boeing 787 uses about a tonne of Victrex’s high-performance plastics – and robust demand from the medical industry. Given that backdrop, and Victrex’s strong balance sheet (it is net cash), the valuation of 16.6 times forward earnings implied by Tuesday’s closing price of £13.58 seems justified.
|Six months to March 31||% change|