Renishaw’s interims are broadly in-line with our forecasts, highlighting a recovery in revenue growth, strong improvements in profitability, and a reinstated dividend. FY21 revenue guidance is in-line with our forecasts, but PBT is expected to be 2% ahead of our forecast at the lower end of its expected range. Interims results – highlighting recovery as expected Revenues declined by -2% y-o-y (-2% at constant currency) to £255.1m (Q1: -6%). Metrology revenue was £235.6m, down -2% y-o-y (Q1: -8%). Geographically, APAC saw y-o-y growth on strong demand for encoder product lines, driven by a recovery in the semiconductor market. EMEA revenue reduced due to ongoing uncertainty caused by the pandemic and weaker demand, particularly in aerospace. Healthcare revenue was £19.5m, up 10% y-o-y (Q1, +16%), with increased demand for both spectroscopy and neurological product lines. Adjusted PBT of £43.4m, compared to £14.3m the previous year, benefitted from cost reduction actions (‘Fit for the Future’ strategy). Adjusted EPS is 49.2p (compared to 15.1p last year). The dividend has been reinstated with an interim of 14.0p announced (0p last year) and cash is strong at £186.6m (vs £120.4m at its year-end in June 2020). Outlook – improving but still mixed Management remains confident in the group’s prospects and is working to mitigate the potential impacts of Brexit, such as expanding sites in Ireland and Germany; however, initially there have been some border delays for UK shipments into the EU since 1 Jan 2021. Despite uncertainties, it expects FY21 revenues of £515-545m (INVe £540.8m) and adjusted PBT of £85-105m (INVe £83.3m). Investment case – valuation is still demanding Renishaw’s status as a provider of capital equipment – albeit aligned with automation and enhanced precision – exposes it to volatile demand patterns in both traditional and new markets. Renishaw is exceptionally strong in its markets, its patent portfolio and financially, and all its cyclical exposure should turn positive at some stage. However, high valuation multiples, low visibility and aerospace disruption leave the shares looking vulnerable to a de-rating in our view. On our forecasts, the shares are trading on a FY21E PE of 63.1x and EV/EBITDA of 34.8x, falling to 43.6x and 26.5x respectively in FY22E.