Synthomer made the biggest losses on the FTSE 250 this morning, crashing nearly six per cent after a downgrade from JP Morgan. The shares have now slumped almost seven per cent.
You might not have heard of this chemical company but they develop resins and polymers, used to coat, bind and attach pretty much anything you can think of for the industrial sectors.
These include polymers for cement mortar and adhesives for the construction industry.
JP Morgan has downgraded its recommendation on the stock to underweight and slashed its price target to 230p from 260p.
“Synthomer's shares have had an impressive run – re-rating by 40 per cent over the past 12 months – but we see this as an opportunity to take profits,” said the research note. “We believe a combination of increasing competition, pricing pressure, heavy emerging market exposure and currencies will lead to downgrades in 2014.”
Several new competitors have entered into the market, which JP Morgan warns could impact Synthomer’s latex and dispersions businesses, which represent around half of group sales.
With around 40 per cent emerging market exposure, a growth slowdown in Asia could hit the company’s earnings, while seven new latex plants in China could reduce its exports and put pressure on global prices.
The broker said that Synthomer should benefit from a gradual recovery in demand in Europe, but believes that is now factored into consensus.