Scots sausage skin maker Devro turnaround story 'undervalued'

Last month the Moodiesburn-based firm said the latest financial year had “started positively” and the group was well positioned for the future.

A new research note by house broker Numis says the improved financial performance now being seen by the company reflects the “substantial changes” brought in by its current management team.

It said that under previous management, the business “lost its focus” but it has undergone a major transformation in the last five years.

The current Devro management team has overseen a transformation of the business, according to analysts. Picture: John Devlin

“The magnitude of these changes are underappreciated, as is the potential for Devro to deliver vastly superior returns than recent history would suggest,” it noted.

“As the global leader in the supply of collagen casings, it operates in an industry underpinned by good structural growth, attractive margins and high barriers to entry in terms of technical capability and scale manufacturing assets.”

The research note said that an acceleration in volume growth from emerging markets is currently being seen and that mature markets should follow as the impact of the pandemic retreats.

Numis said that at current market levels shares trade at a significant discount to peers.

“We believe that the size of the discount is no longer justified given the recent operational and financial performance of the business. “Numis has set a new target price of 250p on the shares, some 30 per cent higher than current levels.

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