Oxford Instruments has released a brief but positive trading update ahead of its AGM today, highlighting strong trading with the full year to be slightly ahead of expectations. Current trading – Strong across the Group Order and revenue growth has been strong in the first five months of the year (March year-end), supported by positive underlying demand across its markets, and across both commercial and academic customers. As expected, FX has adversely impacted revenues and operating profit and at current rates provides a FY22 headwind of 4% and 3% respectively (INVe 5% and 4%). Outlook – positive and ahead of expectations A healthy pipeline across its end markets, a strong order book and acquisition contribution give management confidence that the full year will be ‘slightly ahead of expectations’ (company compiled FY22 adjusted operating profit forecast range of £59.7-63.0m – an average of £61.2m – INVe £60.8m), despite ongoing uncertainties including supply chain disruptions. Investment case – expanding margins and strong balance sheet We view Oxford Instruments as a pioneering company with scope to improve the structure of the group through portfolio and operational adjustments. Select M&A enhances the ‘tidy up’ strategy of the business model and it is encouraging to see margin enhancement continuing. We admire the business model and its prospects, but believe this is reflected within its current valuation multiples. We remain at Hold. On our current forecasts, the shares trade on a FY22E PE of 29.2x and EV/EBITDA of 17.4x, falling to 28.5x and 16.6x respectively in FY23E. Upcoming catalyst Management is hosting an analyst day tomorrow, 22 September, to review its quantum technology facilities in Abingdon and its half-year results are due on 9 November.