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By Sarah Young
LONDON, July 29 (Reuters) - British engineering company GKN said it was confident regarding the rest of 2014 after its car parts supply division on Tuesday boosted first-half profits, prompting a 6 percent jump in its shares.
GKN posted a 6 percent gain in pretax profit to 296 million pounds ($502 million) for the six months to June 30, in line with expectations, and said it would raise its interim dividend by 8 percent to 2.8 pence per share.
The stock, which had lost about 10 percent of its value over the last six months, was up by more than 6 percent to 364.9 pence at 0818 GMT, topping Britain's bluechip index.
Attributing the recent share price weakness to concerns over currency headwinds, Cantor Fitzgerald analyst Andy Chambers, who rates GKN a "buy", said the results made GKN look undervalued on its 11x full-year 2015 estimated price-earnings ratio and that a valuation closer to 13x would be more appropriate.
"This is a welcome relief rally. The stock was too cheap, numbers are in line, that's reassuring," said Espirito Santo analyst Nick Wilson, who also holds a "buy" rating.
Thirteen of the 19 analysts covering GKN rate it a "strong buy" or a "buy".
The company said a stronger pound had a 24 million pound impact on profit in the period.
It warned in February that the strengthening of the pound against the dollar - sterling gained almost 2.5 percent against it in the first half - would have a negative impact on its bottom line, but it was confident it could offset it.
The offset was led by its Driveline business, which supplies car makers such as Volkswagen with components and which accounts for almost half of group sales. That unit delivered organic sales growth of 11 percent, ahead of global auto production, as the company increased its content per vehicle.
Chief Executive Nigel Stein said in the second half he expected GKN to continue to outperform in its key markets and post good underlying financial results despite sterling's strength.
"Growth in the second half in autos [is seen] very slightly down on the first half, but not much, so it looks to us a repeat of the first-half with just that currency factor to take in," Stein told reporters on a call.
Analysts expect GKN to post a pretax profit of 591 million pounds in 2014 according to a Thomson Reuters consensus forecast.
GKN, which makes about a third of its sales from supplying planemakers such as Airbus and Boeing, said its commercial aerospace unit posted organic growth of 5 percent in the first half, and was poised for more of the same given recent developments.
Airbus this month announced the launch of an updated version of its A330 wide-body jet, the A330 neo, as well as several big orders for the plane.
"That's good news for us. We see it as broadly a net positive," Stein said.
$1 = 0.5893 British Pounds Reporting by Sarah Young; editing by Jason Neely