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1. Company Snapshot

1.a. Company Description

Victrex plc, through its subsidiaries, manufactures and sells polymers worldwide.The company operates through two segments, Industrial and Medical.It develops PEEK and PAEK polymer solutions, and semi-finished and finished parts.


The company also offers specialist solutions for medical device manufacturers; sells thermoplastic polymer components; and engages in trading activities.It serves automotive, aerospace, energy and industrial, manufacturing and engineering, electronics, and medical markets.Victrex plc was founded in 1993 and is headquartered in Thornton-Cleveleys, the United Kingdom.

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1.b. Last Insights on VCT

Victrex plc's recent performance was negatively impacted by weak trade data from China, causing the FTSE 100 index to decline. The company's financial prospects appear precarious, with some analysts questioning whether the stock is overpriced. Additionally, the UK's market landscape has been influenced by concerns over global economic recovery, leading to a volatile environment for investors. Furthermore, the company's recent insider activity has been relatively low, suggesting a lack of confidence in the stock's prospects.

1.c. Company Highlights

2. Victrex Delivers Mixed Results with Volume Growth Offset by Margin Pressures

Victrex reported a mixed set of results for the first half of 2025, with strong volume growth of 16% driven by key sectors such as Aerospace, Electronics & Energy, and Industrial. However, revenue growth was muted at 5% (or 8% in constant currency), reflecting unfavorable sales mix and currency headwinds. Profit before tax (PBT) was flat in constant currency, impacted by start-up challenges at the new China plant and mix effects. Gross profit fell 4% to £64.3 million, with margins declining 390 basis points due to China plant ramp-up costs and an unfavorable mix. Underlying earnings per share (EPS) dropped 16% to £0.226, missing analyst estimates of £0.2484, while reported EPS improved due to lower exceptional items. The interim dividend was maintained at £0.1342 per share, reflecting the company's commitment to shareholder returns despite earnings pressure.

Publication Date: May -12

📋 Highlights
  • Volume Growth: 16% increase in first-half volumes, driven by Aerospace, Electronics & Energy, and Industrial sectors.
  • Revenue Performance: 5% revenue growth (8% in constant currency) due to unfavorable sales mix and currency impacts.
  • Gross Margin Decline: 4% drop in gross profit to £64.3 million, with a 390 basis point margin decline.
  • EPS and Dividend: 16% decline in underlying EPS to £0.226, with interim dividend maintained at £0.1342 per share.
  • Cash Flow: 128% cash conversion, with operating cash flow of £30.7 million and free cash flow of £22.5 million.

Operational Challenges and Strategic Investments

The China plant faced significant start-up challenges, reducing expected volumes to 50 tonnes (from 150-200 tonnes) and impacting profits by approximately £2 million. Despite these issues, management emphasized the plant's strategic importance for growth in Automotive, Electronics, and VAR sectors. Victrex also highlighted progress in its Magma mega-programme, which underscores long-term growth potential. Self-help initiatives contributed to robust cash conversion of 128%, with operating cash flow of £30.7 million and free cash flow of £22.5 million. The company's Microsoft D365 ERP system was successfully implemented, enhancing operational efficiency and collaboration with customers.

Cash Flow and Leverage

Victrex reported strong cash flow performance, with operating cash flow of £30.7 million and free cash flow of £22.5 million. The company maintained tight control over discretionary spending and capital expenditures, prioritizing safety-related investments. SG&A costs remained flat, excluding wage inflation and employee rewards, with discipline expected to continue in the second half. The company's strong cash flow supports its dividend payout, with a dividend yield of 7.07%, and provides flexibility for share buybacks. Victrex's free cash flow yield of 6.94% underscores its ability to generate cash and return value to shareholders.

Segment Performance

The Medical division saw a 1% revenue decline, partly due to destocking in Spine, while Sustainable Solutions grew 6%. Aerospace volumes grew 7%, driven by increasing build rates and new applications, while Electronics volumes rose 17% due to semiconductor growth. Energy & Industrials volumes were up 15%, supported by U.S. policy changes. Value Added Resellers saw a 30% volume increase, though outlook remains uncertain. The company highlighted white space opportunities in PFAS replacement and emerging opportunities in pharma and non-implantable medical devices, which could drive future growth.

Outlook and Valuation

Victrex upgraded its volume guidance to high single-digit growth for the year, driven by strong first-half momentum. Gross margin is expected to improve to 45-47% in the second half, reflecting better mix and stabilization of the China plant. The company faces a currency headwind of £8-9 million for the full year but remains confident in its strong end-market positions. With a P/E ratio of 42.62 and P/S ratio of 2.52, Victrex's valuation reflects its growth potential and leadership in innovation. However, the stock's premium valuation may be at risk if margin pressures persist or volume growth slows.

Management Commentary

3. NewsRoom

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How Recent Developments Are Shaping the Victrex Investment Story

Nov -27

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How Analyst Views Are Shaping the Changing Story for Victrex Shares

Nov -12

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Polyether Ether Ketone Market Forecast and Companies Analysis 2025-2033 Featuring BARLOG plastics, Caledonian, Ensinger, Evonik, J.K. Overseas, Pan Jin Zhongrun, SABIC, Solvay, Victrex

Oct -30

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Form 8.3 - IQE Plc

Sep -09

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Taylor Wimpey (LSE:TW.): A Fresh Look at Valuation After a Year of Share Price Pressure

Sep -09

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Assessing Diageo (LSE:DGE) Shares: Is the Current Valuation a Missed Opportunity?

Sep -09

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Does Lloyds Offer More Value After Latest UK Interest Rate Decision?

Sep -09

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HSBC sees gradual unwinding of OPEC+ voluntary cuts over next year

Sep -09

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.58%)

6. Segments

Sustainable Solutions

Expected Growth: 8%

Victrex plc's Sustainable Solutions segment growth is driven by increasing demand for lightweight, high-performance materials in aerospace, automotive, and industrial applications. The company's PEEK and PAEK polymers offer superior strength, durability, and environmental benefits, aligning with industry trends towards electrification, sustainability, and reduced carbon footprint.

Medical

Expected Growth: 6%

Victrex plc's Medical segment growth is driven by increasing demand for implantable devices, orthopedic and spinal implants, and dental applications. The rising need for minimally invasive surgeries, growing elderly population, and advancements in medical technology also contribute to this growth. Additionally, Victrex's PEEK polymer's biocompatibility, corrosion resistance, and sterilizability make it an ideal material for medical devices, further fueling growth.

7. Detailed Products

Victrex PEEK Polymers

High-performance polymers used in demanding applications, offering exceptional mechanical, thermal, and chemical resistance.

Victrex PEEK Fibers

High-strength, high-modulus fibers used in composite materials for aerospace, industrial, and sports equipment applications.

Victrex PEEK Films

Thin, flexible films used in electrical insulation, wire wrapping, and composite materials.

Victrex PEEK Composites

High-performance composite materials used in aerospace, industrial, and sports equipment applications.

Victrex Aptiv Films

High-performance films used in electrical insulation, wire wrapping, and composite materials.

Victrex Tx Pipe

High-performance piping systems used in oil and gas, chemical processing, and power generation.

8. Victrex plc's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Victrex plc is medium due to the availability of alternative materials such as metals and ceramics in certain applications.

Bargaining Power Of Customers

The bargaining power of customers is low due to Victrex plc's strong relationships with its customers and the specialized nature of its products.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium due to the availability of alternative suppliers for certain raw materials, but Victrex plc's strong relationships with its suppliers mitigate this risk.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the production of high-performance polymers, including significant capital expenditures and technical expertise.

Intensity Of Rivalry

The intensity of rivalry is high due to the competitive nature of the industry, with several established players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 7.64%
Debt Cost 3.95%
Equity Weight 92.36%
Equity Cost 7.72%
WACC 7.43%
Leverage 8.28%

11. Quality Control: Victrex plc passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Elkem

A-Score: 5.0/10

Value: 8.8

Growth: 2.6

Quality: 3.2

Yield: 5.6

Momentum: 7.5

Volatility: 2.7

1-Year Total Return ->

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Stock-Card
Victrex

A-Score: 4.7/10

Value: 6.1

Growth: 1.9

Quality: 6.4

Yield: 8.1

Momentum: 1.5

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
Elementis

A-Score: 4.0/10

Value: 5.1

Growth: 1.7

Quality: 3.8

Yield: 1.2

Momentum: 6.5

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Essentra

A-Score: 3.5/10

Value: 4.0

Growth: 1.3

Quality: 3.6

Yield: 6.2

Momentum: 1.0

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
Zotefoams

A-Score: 3.5/10

Value: 3.7

Growth: 5.4

Quality: 3.8

Yield: 3.1

Momentum: 4.0

Volatility: 1.0

1-Year Total Return ->

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Stock-Card
LANXESS

A-Score: 3.1/10

Value: 8.3

Growth: 1.4

Quality: 1.9

Yield: 2.5

Momentum: 1.5

Volatility: 2.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

6.7$

Current Price

6.7$

Potential

-0.00%

Expected Cash-Flows