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Bank: Barco a Top Pick

July 11, 2023

Investment bank Berenberg has conducted a major review of European TMT and related stocks and has picked Dutch imaging technology business Barco as a “BUY” and gives its price target for the business as €32 (current share price about €23.26) and a potential 38 per cent upside. Barco is its ‘Top Pick’ out of nine technology hardware stocks.

Barco is perhaps best known for its high-end projectors for cinema and display technology. The group is market leader in cinema projection, wireless meeting room technology and displays for healthcare.

The bank’s report says: “Barco is a provider of imaging-related technology, serving three main end-markets: entertainment, enterprise and healthcare. The business had staged a turnaround since new management joined in 2016, with significant margin improvement followed by a return to top-line growth; however, the Covid-19 pandemic had a significant impact on the group, particularly in terms of cinema and corporate clients, given the closure of cinemas, events and offices.”

As to what to expect for H2, the bank says: “Barco’s 10-15 per cent revenue guidance is at least partly

predicated on a recovery in China. While the Entertainment division has been strong so far this year, this has been almost entirely driven by Europe and North America, given the slow start in China following Covid-19-related lockdowns. Barco is also set to announce the results of its strategic review of the Large Video Walls segment in H2, which should outline a path to better profitability in this segment.”

“Q1 sales were strong overall,” states Berenberg, “but some investors were concerned at the negative margin implications of a mix shift towards the Entertainment division. While Entertainment does generate profitability below the group average, margins last year were affected by supply chain issues, and the strong growth in Entertainment this year should lead to operating leverage. Ahead of the expected announcement of the outcome of the strategic review of the Large Video Walls segment, we believe the current share price weakness presents a buying opportunity.”

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