Johnson Matthey Share Price Pressured as Energy Costs Bite

Summary:
• The Johnson Matthey share price has been in a tight range in the past few months as the company experiences a slow recovery.

The Johnson Matthey share price has been in a tight range in the past few months as the company experiences a slow recovery. It has remained between the support at 1,651p and resistance at 2,535p. The stock was trading at 2,133p on Tuesday, which was about 38% below the highest level in 2021, giving it a market cap of over 3.9 billion pounds.

Profitability retreats as energy costs soar

Johnson Matthey is a leading British industrial company that provides products to the transport, energy, and other industrial services. The firm is best known for manufacturing catalytic converters that are used in the automobile industry.

Johnson Matthey operates in five segments like clean air, PGMs, catalyst technologies, hydrogen technologies, and value businesses. Its clean air business is the biggest component of its business. In the six months to September, the segment brought in £1.27 billion, which was higher than the £1.1 billion it made a year earlier.

The clean air business was followed by PGM Services and catalyst technologies, which made £282 million and £275 million, respectively. In total, the company’s business brought in over £2.045 billion, up from £1.85 billion in 2021.

However, the rising costs helped push Johnson Matthey’s profits significantly lower. Profit after tax dropped from £269 million to £201 million. As a result, it maintained its dividend to 22p.

There are several reasons why Johnson Matthey share price will likely do well in 2023. First, there is a likelihood that its profitability will improve as the energy market improves. Energy has been one of the company’s biggest costs. Second, there is a possibility that the automobile industry will rebound as inflation eases. Further, it is set to grow as demand for hydrogen solutions rebounds.

Johnson Matthey share price forecast

The daily chart shows that the Johnson Matthey stock price has been crawling back after falling to a low of 1,765p on October 13. In this period, the stock has moved slightly above the 25-day moving average. It is now approaching the important resistance level at 2,290p, the highest point on August 16. The Relative Strength Index (RSI) has been in an upward trend.

The stock will likely continue rising as bulls target the key resistance level at 2,535p, the highest point on April 28. A move below the support at 2,000p will invalidate the bullish case.