UBS has downgraded its rating for precision tool maker Renishaw from 'buy' to 'neutral', saying that it foresees little upside given the stock's impressive rise in 2012.

Over the past 12 months, the shares have risen by over 87%, including Monday's near 3% fall. This was helped by the firm recording recording revenues in the first quarter, reported in October.

The broker said: "Having been the best performer in UK Capital Goods in 2012 we think Renishaw's shares may struggle to make further ground without clarity on its end-markets. We find judging momentum at Renishaw more difficult than normal."

UBS believes that the absence of further electronics project orders in the near term will offset any potential improvements in industrial demand elsewhere.

Renishaw's machine tools have been a beneficiary of Apple's latest product developments for the re-modelled iPhone and iPad, the broker said. However, it said that this activity is "lumpy" and the company is now entering a quiet period between product cycles. "This may make it difficult to repeat the 15%+ upgrades seen in 2012 in our view."

Nevertheless, the broker still believes that the long-term outlook is "very compelling" with the company having the capacity to double sales over the next five to six years.

The target price for the shares has been raised from 1,900p to 2,000p.

BC

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