RBC Capital upgrades DCC to 'buy'
By Michele Maatouk
Date: Wednesday 15 Jan 2025
(Sharecast News) - RBC Capital Markets upgraded sales, marketing and support services group DCC to 'outperform' from 'sector perform' on Wednesday and lifted the price target to 6,000p from 5,800p following recent weakness.
RBC downgraded the shares in early December after they hit 5,800p on the back of the company's announcement that it would focus on Energy.
"Whilst UK/European exposed stocks have been weak post the UK Budget and weak European PMIs, DCC is relatively defensive, with potential for M&A to provide positive earnings per share momentum, there is likely to be upcoming positive newsflow on the disposals and associated material returns of cash to shareholders," it said.
"Despite hitting forecasts, delivering on M&A, shrinking the proportion of SRO business and announcing the group will focus on Energy, the shares have still underperformed the sector by 10% over the last 12 months."
RBC said that after recent weakness, it sees enough upside to move back to outperform.
The bank said that with many macroeconomic and geopolitical question marks across the market, it now sees DCC as "an attractive place to be", with catalysts ahead.
"In an uncertain world, DCC ticks several boxes. We see short-term trading as likely to be sound, expect a disposal of Healthcare hopefully in the next six months and expect further delivery of its Energy strategy, including M&A," it said.
"Whilst Energy standalone is tough to value, the division is cleaner, has positive mix drivers, is higher return and has more favourable working capital dynamics."
At 1115 GMT, the shares were up 2.4% at 5,165p.
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