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30 Mar 2021 | 14:55

Broker tips: Eqtec, Fevertree, Victrex

(Sharecast News) - Analysts at Canaccord Genuity initiated coverage on bioscience energy company Eqtec with a 'speculative buy' rating on Tuesday, highlighting its "next-generation" waste gasification technology. Canaccord stated that Eqtec had developed and patented a thermochemical gasification technology suitable for three distinct waste verticals - agri-food waste, biomass and municipal solid waste.

The Canadian bank said its "unique technology" was commercially proven across several business cases, returning recoverable process thermal energy and a high-grade fuel source, which can be used for electricity generation, or as feedstock for hydrogen or biofuels.

Canaccord also noted that advanced gasification had the highest process efficiency of all conventional waste-to-energy technologies, was more sustainable and provided increased control over the generation and release of greenhouse gases.

"As a result, we expect it to grow rapidly in Europe, assisted by recent regulatory changes, as well as across North America and Asia. In the near term, the company has multiple major projects approaching financial close, mostly in the UK and Ireland, and we expect multiple project-related triggers over the next few months," said Canaccord, which hit Eqtec with a price target of 3.25p.

Fevertree slumped on Tuesday after RBC Capital Markets downgraded its stance on shares of the posh tonics maker to 'sector perform' from 'outperform' and slashed the price target from 2,600.0p.

RBC said the US business is doing as well as it anticipated. However, the margin outlook has "significantly" deteriorated.

"Fevertree has already missed margin guidance five times in the last four years, and after exploring the moving parts, we are not sure FY21E margin guidance looks conservative," it said.

"Lower margin forecasts and a higher UK tax rate leave us with a 2,000.0p price target."

Citi upgraded shares of polymer maker Victrex on Tuesday to 'neutral' from 'sell', citing the first signs of volume growth "as many of its key end markets look to be through trough levels".

"The relatively low probability of incremental bad news coupled with the valuation closing in on recent averages means that we move to neutral," Citi said. "However, despite the uptick in volumes, we think the drop through to earnings will be subdued as Victrex continues to unwind its inventory levels resulting in under recovered overheads as production volumes remain below sales volumes."

Citi said FX headwinds and bonus accruals will also provide further headwind in 2021.

"Looking into the mid-term, we expect profit before to benefit from volume growth as the inventory unwind completes with upside potential from Magma and Gears programs."
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