Volution Group PLC

Volution Group PLC (LON: FAN) is an FTSE 250 index listed designer and manufacturer of energy-efficient indoor air quality solutions.

FY22 results for the year ended 31 July 2022 is expected to be released on 6 October 2022.

Investment Rationale – SELL at GBX 411.50

• Profit Booking: In expectations of its adjusted EPS to be at the top end of the range of market expectations in FY22, the stock has shown a rally over the past two weeks. Also, FAN’s stock price has surged over 21% in the past month, which is giving a profit booking opportunity.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/Sales, EV/EBITDA, Price/Earnings, and Price/Cash Flow) are overvalued against the industrials’ sector.
• Macroeconomic Uncertainties: Soaring energy prices, squeezing consumer disposable income, interest rate hike, geopolitical tension, economic recession, and monetary policy tightening can continue to put equity market under pressure.
• Technical Standpoint: The current market price is hovering close to the upper Bollinger band, while 14-day RSI (~68.07) is confirming the overbought scenario. Therefore, price can face retracement from this level in the short-term.

One Year Share Price Chart  

 (Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E) (Illustrative)

Conclusion

Based on the decent notional gains, macroeconomic challenges, coupled with the unfavorable valuation conducted above, a "SELL" recommendation on Volution Group PLC has been given at the closing market price of GBX 411.50 (as of 1 August 2022).

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 level is 2 August 2022. 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 scenarios.

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.

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