Rexel: Morgan Stanley upgrades its recommendation

(CercleFinance.com) - On Monday, Morgan Stanley raised its recommendation on Rexel shares from 'weighted in line' to 'overweight', with a price target raised from 24 to 29 euros.


In a research note, the analyst points out that the French electrical supplies distributor has managed to improve its operating margin 'structurally' in recent years, raising it from 5% in 2019 to 7.3% in 2022.

Morgan Stanley estimates that this margin will fall to 5.9% this year, but sees it rising to 6.7% in 2028, at a time when the consensus expects the group's earnings forecasts to be revised downwards.

Rexel trades on an Enterprise Value/Ebita ratio of 8.2x, which represents a 37% discount to the rest of the European capital goods sector, a differential we consider attractive", he adds.

In his opinion, Rexel is also one of the groups, along with Sweden's Alfa Laval, with success stories in the USA, where the company generates a growing share of its sales.

According to MS, M&A activity could support market forecasts in 2025, a year which the analyst currently sees as a "transitional" one.

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