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At the beginning of July, the Analysis Office presented its list of convictions for the second half of the year. Not to be confused with the “High Five”, the monthly updated selection of 5 stocks, this list is updated semi-annually. The opportunity to see the stocks that convinced Portzamparc of their medium-term potential. detailed review.
Portzamparc begins presenting this list with an adamant statement: the timeframe remains complicated for the small and medium-cap asset class. Against the background of great uncertainty, investors have left the sector, which is reflected in particular in reduced liquidity since the spring, “especially on the CAC Small”, explains the analysis office.
Portzamparc takes the opportunity to take stock of the first-half introductions. Not surprisingly, transactions were fewer than last year, but around ten companies (Icape, Lhyfe, Smaio, etc.) entered the market with rather mixed performance at the moment.
Portzamparc’s convictions in the first half of the year held up well
In the first half of the year, the bureau’s conviction list fared better than the CAC Mid&Small, down just 9.7%, while the index fell 14.7% (data as of July 6). In this list, in descending order of performance, we found: Groupe Gorgé (+31.2%), GTT, Eramet, Clasquin, Spie, SII, Lisi, Fountaine Pajot, Dontnod, Kalray and Metabolic Explorer (-50.4%).
For the second half, Portzamparc has decided to renew some of these players: it keeps Eramet, Lisi, Fountaine Pajot and Kalray and decides to add Esker, Carmat, Ipsos and Lumibird.
In relation to these new additions, Porzamparc buys Esker with a target price of 191 euros. He believes the software maker’s fundamentals remain solid and that the current valuation finally provides an entry point while the price has been divided by three since the peak.
For Carmat, the price target is 31.70 euros, while the medical need for the integral heart prosthesis developed by Medtech remains very high (150,000 hearts per year in Europe and the United States). Portzamparc notes “excellent feedback from doctors on early sales.” But beware, the resumption of implantations in the fourth quarter is subject to the green light from the certifying bodies, while the production quality of the prosthesis remains the main challenge facing the group.
Lumibird not very sensitive to the current context
The target price for Ipsos is EUR 60.80. The strategic plan 2022-2025 convinces with an expected acceleration of organic growth and a structural margin increase (in 2025 an operating margin of more than 13% is expected) of the study-by-survey specialist. Portzamparc sees many growth drivers both geographically (US) and sectorally (TMT, healthcare, public sector). However, beware of the context of wage inflation and the “possible slowdown in mass consumption in a deteriorated economic context.
Also read / Lumibird, the French (Breton) Laser
Last entry in this list of beliefs: Lumibird. The laser specialist hardly suffers from the current framework conditions, has also confirmed its forecasts for 2023 and is reasonably valued. Enough to justify a price target of 24 euros. Specifically, the bureau states that the stock trades at 15.8 times the enterprise value/expected operating income (EV/EBIT) ratio for 2022, versus 18 times on average. Notably in this sector, less profitable NKT Photonics was bought by Japanese Hammmatsu at 30 times its EV/Ebit ratio.
How will this list fare for the second half? The future will tell, Portzamparc will definitely take stock next December.
Laurent Grassin (email@example.com)