Broker tips: Focusrite, Rio Tinto, Antofagasta, Clarkson

Analysts at Berenberg initiated coverage on audio-products company Focusrite with a 'buy' rating and 1,100.0p target price on Thursday, citing a number of near-term tailwinds and M&A optionality.

Berenberg said Focusrite had differentiated itself in recent years to address the content-creation and sound-reproduction markets, servicing both amateurs and professionals, which differentiated it from competitors who tend to specialise in niches.

"This has allowed the business to grow at almost twice the pace of the overall market. With a total addressable market of circa £5.0bn, we believe there is plenty of headroom for Focusrite to continue taking market share, even in a more challenging macroeconomic environment," said Berenberg.

The German bank pointed out that near-term headwinds that affected the group in 2022, including supply chain pressures, spiralling freight costs, and component shortages, resulted in a 240 basis point reduction in gross margin. However, in 2023, Berenberg expects these headwinds to reverse, to the benefit of both the top line and gross margin.

Berenberg also highlighted that with a £40.0m revolving credit facility, the business was well placed to undertake further M&A, with acquisitions likely to remain "a key driver of growth".

Barclays downgraded Antofagasta but upgraded Rio Tinto on Thursday as it took a look at European metals and mining stocks, arguing that the China pivot has room to run.

"China's reopening and 'whatever it takes' approach to the property sector are tectonic shifts that should underpin an acceleration in commodity demand through 2023," said Barclays, which added that further measures to bolster consumer confidence/job creation/growth cannot be ruled out.

"Allied with ongoing growth in energy transition-related commodity demand, supply side underinvestment and potential bottoming out in ex-China commodity demand, 2023 is set to be another strong year for the miners and steels," the bank said.

Barclays downgraded Antofagasta to 'equalweight' from 'overweight' following sharp outperformance, but lifted the price target to 1,450.0p from 1,275.0p On the other hand, the bank upgraded Rio to 'equalweight' from 'underweight' and hiked its price target on the stock to 5,800.0p from 4,300.0p, stating it was neutralising its rating given policy shifts.

Analysts at Canaccord Genuity initiated coverage on shipping services firm Clarkson with a 'buy' rating and 4,040.0p target price on Thursday, citing both "progress and profit".

Canaccord Genuity thinks maritime markets face "choppy prospects", but added that structural factors were seeing maritime tonne-miles travelled expanding.

It also said propulsion decarbonisation and higher cost of finance meant limited new shipbuilding, implying "a firm rate environment" in most maritime segments into 2023 – and through to 2030, potentially.

"The 'so what?' is that Clarksons looks set to reap the reward of higher market rates, while lower volumes and improving IT efficiency suggest gross broking profit per employee might rise (faster than in a high-volume-led-growth market), which we think will help support margins, profits, and dividends," said Canaccord.

The Canadian bank also reckons the shares offer scope for roughly 12% total shareholder return without multiple re-rating due to cash and dividend generation.