Downgrade GKN to Underperform; upgrade IMI to Neutral
US automotive production is approaching the peak and questions about the timing of an end to
Chinese tax incentives will continue to build; we therefore downgrade GKN to Underperform
from Outperform. We upgrade IMI to Neutral from Underperform. For the past two years, we have
consistently forecast IMI earnings to come in materially below Consensus. As we enter 2016 we no
longer forecast a significant earnings disappointment. While IMI’s valuation still looks expensive,
the lack of an earnings catalyst to drive further underperformance leads us to upgrade the name.