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(Sharecast News) - UBS upgraded Spirax on Tuesday to 'buy' from 'neutral' and hiked the price target to 10,500p from 7,500p.
"Our new deep-dive analysis covers Steam Thermal Solutions (STS) in China, key growth drivers in Electric Thermal Solutions (ETS), a refreshed view on Biopharma, and a review of concerns around returns (ROCE)," the bank said.
"We come away positive."
As far as the STS division is concerned, UBS said it reckons worries about China are overstated.
"While a sharp recovery in capex is unlikely short term, Spirax's business appears to be stabilising," it said. "This matters because strong double-digit (DD) performance in Maintenance, Repair and Operation (MRO) in China could return the region to growth by H2 (+3%).
"With China less likely to be a drag and STS set to outperform (UBS FY'26 organic sales +5.5% versus consensus +4.1%), sentiment should improve."
As far as ETS is concerned, UBS said the division is benefiting from positive pricing and multiple demand drivers: semiconductors, medium voltage, data centres.
"These support high single-digit (HSD) growth, even as consensus expects a slowdown," it said. "Execution improvements, efficiency gains, and a favourable mix should lift margins to circa 20% by FY'28."
The bank also noted that Watson-Marlow (W-M) orders rose double-digit in H1'25, and said it expects this to continue in the second half, supporting mid-teens Biopharma organic growth.
"Despite US drug pricing concerns, we track circa $400bn in announced Pharma investments, much of it Biopharma-focused.
"If even part of this is incremental, it could drive significant capex. Combined with sector recovery, W-M could deliver circa 9% organic growth in FY'26-27, with margins likely above consensus."
At 1535 GMT, the shares were up 2.1% at 7,165p.