Broker tips: Volex, Ocado

(Sharecast News) - Analysts at Berenberg lifted their target price for Volex from 700p to 750p on Tuesday, as they reiterated a 'buy' rating on the stock and said last week's halfyear trading update underscored the group's broadbased momentum and accelerating margin progress.

Berenberg said Volex delivered another strong performance in the six months ended 30 September, with organic revenue growth of 21% and robust contributions across all five core endmarkets. EV exposure continued to expand, helped by marketshare gains with the group's largest customer and rising content on new platforms, while complex industrial technology benefited from a $10m revenue uplift ahead of a US manufacturing consolidation. Data centre growth normalised after last year's surge, but Berenberg said structural demand remained "highly supportive".

The German bank highlighted ongoing margin expansion driven by mix, operational efficiencies and highermargin M&A, noting that progress was running ahead of Volex's 12% mediumterm target. Its updated forecasts now assume 23% EBIT growth in FY27, well above the roughly 15% CAGR required to meet the group's goals.

Berenberg said secondhalf revenues should be broadly stable and that Volex expects FY27 underlying operating profits to land at the upper end of the current $146m to $153m consensus range. It also raised its EPS estimates by around 5% and said recent shareprice weakness looked overdone.

Ocado surged on Tuesday as JPMorgan upped its price target on the stock to 460p from 290p and reiterated its 'overweight' rating, saying that operational momentum continues to build and there are several catalysts ahead.

"We continue to be excited about the Ocado investment case given ongoing momentum in the turn-around story with several drivers for a sustained re-rating from here," the bank said, as it argued that the pipeline of five new customer fulfilment centre ramp-ups scheduled for 2027-2029 was largely de-risked, providing visibility into Technology Solutions revenue growth.

"Coupled with stringent cost management, we project a group EBITDA compound annual growth rate of 21% for 2025-2028E," it said. "As such, management remains highly confident of achieving underlying free cash flow break-even by H226, an important milestone for the market."

JPM also noted that the Ocado Retail operations, a joint venture with Marks & Spencer, have emerged as the fastest-growing UK retailer, with a 15% revenue increase in the first half, and with margin expansion as well as further capacity additions.

The bank pointed to a now solid balance sheet with no material refinancing requirements over the next three years, and a strong catalyst pipeline into the fourth quarter, with upcoming capital markets days at Kroger and M&S likely to reinforce an accelerating strategic pivot toward online grocery.

JPM's new target price still only ascribes value to what Ocado has already contracted and assumes broadly no incremental modules, it said, adding that this was conservative given the potential for further module signings from both existing partners and new customers.