J.P. Morgan Cazenove downgraded Johnson Matthey to "neutral" from "overweight" and reduced its March 2027 price target to 2,000p from 2,250p following a material reduction in the agreed sale price of the company's Catalyst Technologies (CT) business to Honeywell.
The previously announced CT transaction has seen its enterprise value cut by 26%, equal to £475 million, taking the agreed consideration to approximately £1.33 billion from the earlier figure of £1.80 billion. J.P. Morgan said the change, combined with delays around Chinese regulatory clearance, has shifted the stock's risk-reward profile.
Johnson Matthey shares were trading at 1,927p as of 23 February 2026. The stock's 52-week range runs from 2,434p at the high to 1,131p at the low. Over the past month the share price has fallen 18.3% and is down 9.6% year-to-date.
J.P. Morgan highlighted two developments underpinning its reassessment: an unexpected delay in obtaining Chinese regulatory approval for the CT deal and the 26% reduction in the agreed enterprise value to £1,325 million. The long stop date for the transaction has been extended from 21 February 2026 to 21 July 2026, with a possible further extension to 21 August 2026 should certain conditions be met.
The adviser attributed the lower headline price to weaker CT performance in the current financial year ending March 2026 and to the deferral of several key sustainable-solutions licensing projects. As a result, the transaction now trades at lower multiples: roughly 11x FY25A reported EBITDA and about 10x FY25A adjusted EBITDA, versus approximately 15x and 13x under the prior terms.
J.P. Morgan set out an alternative downside scenario should regulatory approval not be secured by the August long stop date. In that case, the bank expects the market to value the CT division at roughly £850 million and its sum-of-the-parts (SOTP) analysis indicates potential downside to around 1,800p for the shares.
The planned cash return to shareholders linked to the transaction has also been reduced to £1.0 billion from the previously stated £1.4 billion. The revised package comprises an £800 million special dividend effected via a share consolidation together with £200 million of share buybacks.
On company earnings, J.P. Morgan adjusted its estimates. It lifted FY26E adjusted EBIT by 1% to £339 million, which equates to a 15% year-on-year increase and sits about 1% above the referenced consensus. FY27E and FY28E adjusted EBIT were increased by 6% and 4% to £383 million and £407 million respectively, running 6% and 5% above consensus.
Reflecting the planned share consolidation, the bank's model shows FY27E and FY28E adjusted EPS rising 11% and 38% to 160.52p and 217.36p. FY26E adjusted EPS is modelled at 122.71p, down 18.6% year-on-year from FY25A's 150.78p.
Under J.P. Morgan's SOTP base case the implied share price is £19.88, based on a total enterprise value of £3.14 billion and net debt of £781.6 million at the end of FY27E. On transaction multiples, Johnson Matthey is shown trading at FY27E and FY28E EV/EBITDA of 5.9x and 5.2x, versus five-year and ten-year medians of 6.4x and 8.4x. FY27E and FY28E price-to-earnings are modelled at 12x and 8.9x, compared with five-year and ten-year medians of 10x and 12x.
J.P. Morgan singled out further delays to the CT sale or any additional adjustments to the sale price as the principal downside risk to its view. The bank also flagged exposure to movements in platinum group metal prices and the rate of electric vehicle penetration as material uncertainties tied to the company's outlook.
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