On Thursday, Rotork Plc. (LON:ROR:LN) (OTC: RTOXY) stock received an upgrade from HSBC (LON:HSBA) from Hold to Buy, with the price target being increased to £3.80 from £3.35. This positive shift comes in the wake of the company's strong performance in the first quarter of 2024, alongside favorable conditions in the oil and gas (O&G) and water and power (W&P) sectors.
The upgrade is based on HSBC's updated O&G capital expenditure (capex) tracker, which indicates that investments are likely to maintain their current high levels. The company itself anticipates a 7% increase in investments for 2025. HSBC's analysis of capex projections within conventional power generation and gas grids, conducted by their European Utilities & Renewables team, suggests that these investment levels will remain robust.
Comments from peers in the United States also point to a highly favorable demand outlook and a strong project pipeline. Given Rotork's strategic position in the supply chain and relatively shorter lead times of 2-3 months compared to the 18-24+ months required for larger projects, HSBC concludes that the demand cycle for Rotork's products is expected to extend into 2025 and potentially beyond.
The upgrade reflects confidence in Rotork's sustained momentum and the ongoing high investment levels in the industries it serves. This outlook is bolstered by the company's quick turnaround capability which positions it advantageously to meet the continuing demand.
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