Johnson Matthey Set to Benefit from Global Trends

Johnson Matthey's auto catalyst business is performing well despite macroeconomic uncertainty; we raise our fair value estimate

Jeffrey Stafford, CFA 16 January, 2012 | 5:11PM
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Johnson Matthey (JMAT) is a rather diverse specialty chemical company, but essentially the firm is in the platinum business. JM is a leading refiner, marketer, and distributor of the rare metal and its close relatives, known collectively as platinum group metals or PGMs. Additionally, Johnson Matthey manufactures a variety of products that include PGMs as a critical component, including automotive catalysts and active pharmaceutical ingredients. We think the company will benefit from several global trends, including regulation to curb emissions and the growth of prescription drug use in the developing world. However, the penetration of electric vehicles is a potential threat further down the road.

We're raising our fair value estimate for Johnson Matthey to account for slightly stronger-than-anticipated half-year results and the impact of the time value of money since our last update. We forecast average annual growth in the double digits for the company's revenue excluding precious metal sales over the next five years, driven mainly by strength in the firm's emission control business.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Johnson Matthey PLC1,512.00 GBX-2.20

About Author

Jeffrey Stafford, CFA  Jeffrey Stafford, CFA, is an equity analyst for Morningstar, covering agriculture and chemical companies.

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