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Berenberg downgrades 'fully valued' QinetiQ
Analysts at Berenberg downgraded their recommendation for shares of defence contractor Qinetiq to 'hold' on Friday, saying its most recent set of results demonstrated that continued progress had been made under its chief executive's strategy and its shares were now "fully valued".
2018 was QinetiQ's second consecutive year of organic growth, with a meaningful expansion of its international business, now accounting for 27% of group sales, which helped drive a 28% jump in the share price over the previous three months.
Berenberg highlighted QinetiQ's solid execution of its growth strategy and the recovery from what the broker said was an "oversold situation" in the previous year as the chief factors behind the shares re-rating back to their sector multiples.
However, given the anticipated decline in underlying profit and reduction in QinetiQ's free cash flow in the current year, Berenberg felt the stock was "unlikely to outperform in the short-term".
As a result, Berenberg stripped QinetiQ of its 'buy' rating on Friday but kept its 276p target price unchanged.