DAVY VIEW

XP Power (XPP) has set a very cautious tone for 2024, which we believe is sensible given recent disappointments. Guidance from the new CFO for revenue declines and financial leverage is very conservative in our view, while CEO Gavin Griggs remains under pressure to deliver a more consistent message to investors. We believe the fundamentals of the business remain intact and once the post-COVID destocking in Healthcare and Industrial Technology has finished, a normalisation of all the key metrics can start to occur. At these valuation levels, potential bidders must be sharpening their pencils. Investors who can lift their horizon and look beyond 2024 could be rewarded in the medium term. We reiterate ‘Outperform’ with an unchanged price target of 2,530p.