AB Dynamics PLC

AB Dynamics PLC (LSE: ABDP) is an FTSE AIM UK 50 Index listed company that specializes in the design, manufacture, and supply of advanced testing, simulation, and measurement products for the global transport industry. Their offerings are primarily utilized in the development of road vehicles, focusing on active safety and autonomous systems, as well as in the automation of vehicles for other sectors like mining and defense. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 1,770.00

• Resistance near Current levels: ABDP’s stock price crossed the Resistance (R1) which was stated in the previous report on 15 April 2025 therefore, there can be a possibility of a decline in resistance levels. Considering the market conditions and the price action, it is prudent to exit the stock.

• Lower Operating Cash Flow Despite Profit Growth: Adjusted cash flow from operations declined to GBP 9.3mn in H1 2025, down 18% from GBP 11.3mn in H1 2024. This was primarily impacted by timing of customer deliveries and a higher trade receivables balance, suggesting a temporary strain on working capital efficiency.

• Heavy Adjustments to Statutory Earnings: Statutory operating profit was GBP 6.7mn versus adjusted profit of GBP 10.8mn, with GBP 4.1mn in adjustments in H1 2025—primarily amortisation and ERP costs—representing a 38% difference. This gap indicates that underlying results may be less reflective of actual statutory performance.

• Muted Growth in Core Testing Products: Revenue from Testing Products rose only 7% YoY to GBP 37.5mn in H1 2024, while SPMM sales were absent in H1. Despite future pipeline visibility, lack of high-value deliveries in this period may have limited top-line momentum within a critical segment.

• Macroeconomic Risk: The market sentiments can remain weak in the short term due to the subdued consumer disposable income, geopolitical tensions, and political risks.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

ABDP is expected to trade at a discount due to several concerns, including weaker operating cash flow despite profit growth, a decline in net cash from GBP 29.1mn to GBP 27.2mn—partly reflecting the GBP 3.5mn acquisition of Bolab—and a higher tax drag on earnings, with adjusted EPS rising 20% to 37.0p in H1 2025, while the effective tax rate increased from 18% to 20%. Broader macroeconomic headwinds such as economic slowdown and elevated interest rates may further weigh on sentiment. For conducting the valuation, the following peers have been considered: Weir Group PLC (LSE: WEIR), Renishaw PLC (LSE: RSW), etc.

Given its current trading levels, the recent financial performance, strategic investments and partnerships, market expansion and cost optimization strategies, relative valuation, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the Current Market Price of GBX 1,770.00 as of 30 April 2025, 08:05 AM, GMT+1. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 30  April 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.