Broker tips: Melrose, Rathbones Brothers, Saietta

Bank of America Merrill Lynch upgraded Melrose to 'buy' from 'neutral' on Tuesday and lifted its price target on the stock to 181.0p from 160.0p.

The US bank pointed to an improved outlook for the company's aerospace business and said it now has more confidence in Melrose's mid-term target of 14% EBIT margins.

BofA also highlighted that widebody production increases at Airbus, improving engine production rates, and aftermarket momentum all supported the company's growth outlook.

Berenberg downgraded Rathbones Brothers to 'hold' from 'buy' on Tuesday and cut its price target to 2,200.0p from 2,400.0p, stating it sees better risk/reward elsewhere in the sector.

The German bank said Rathbones' results showed a resilient performance in a challenging market environment, and came in broadly in line with consensus expectations.

Berenberg has revised its forecasts to account for the uncertain economic environment and Rathbones' latest results, despite the "optically large change" bringing them close to the prevailing consensus.

Berenberg also noted that Rathbones' share price had risen around 35% over the past 12 months, highlighting the market's enthusiasm for its strategic direction.

"However, the shares currently trade on circa 16x consensus P/E (FY 2023E) at the upper end of their 12-month historical range of 9-16x P/E," Berenberg noted.

Analysts at Canaccord Genuity slashed their target price on engineering firm Saietta from 285.0p to 120.0p on Tuesday following the group's operational and trading update earlier in the day.

Canaccord Genuity noted that that Saietta's update highlighted its progress with its Indian joint venture and customers, including two major original equipment manufacturer programs, and the refocus of its strategy onto fully funding itself from its existing activity.

While the group now expects no need for external fundraising for the coming financial year, it warned on the rest of the business, with its heavy-duty wing, including ConMet, running "much more slowly than previously indicated", and its Propel marine operation struggling with key component availability and consequent revenue generation.

"We are making material downgrades to our near-term expectations, reflecting the pushing to the right of the ConMet transaction and Propel," said Saietta, which reiterated its 'buy' rating on the stock.

"The positive in the release is that the remaining revenue forecast is now with a high degree of certainty and the scale of the market opportunity is unchanged; we continue to see very rapid take-up of EV mobility in India, and market opportunity in e-drive solutions."