Analysts at Berenberg initiated coverage on value added electronics group Solid State Plc with a 150p target price and a 'buy' rating on Tuesday, stating the stock represented a "well-placed defence opportunity".
Berenberg said its forecasts for Solid State, which supplies the industrial and defence markets with durable components, incorporate a "conservative new capacity ramp-up" despite strong demand. From FY28, Berenberg expects mid- to high-single-digit growth rates and forecast EBIT margins to continue to rise from mix and volume improvements.
Given the company's placement between "strong defence tailwinds", with defence making up 30% of revenues, as well as well-invested foundations, quickening large order cadence, numerous international high-quality blue-chip customers and an attractive valuation, it thinks this Solid State represents "an excellent way" to buy into the defence theme.
"We think that the company's market penetration to date, established defence relationships, long-term structural defence tailwinds and strong capital foundations demonstrates that Solid State is a compelling opportunity at an attractive valuation," said the German bank.
Berenberg also noted that Solid State currently trades on a FY26 price-to-earnings ratio of 15.9x and enterprise value/EBIT of 11.7x.
Reporting by Iain Gilbert at Sharecast.com