Source: Sharecast
Berenberg said DCC's FY25 results on 13 May delivered "credible" adjusted underlying earnings growth of 4.8% year-on-year, while a 5% increase in its dividend marked the 31st consecutive year of growth since its IPO in 1994.
The German bank noted that investor attention remains on DCC's strategic action plan to simplify operations and focus solely on its energy business, with the disposal of its healthcare arm set to be completed by Q325.
However, despite "solid progress" towards simplification, Berenberg said the market was yet to ascribe "meaningful value" to DCC's share price, with a valuation of just 10.7x FY26 price-to-earnings for a business that has "an attractive" short-term returns profile and long-term energy story.
"We reduce our price target to 6,700.0p on a SOTP basis [...] and think there is a significant opportunity for investors willing to do the work," said Berenberg, which has a 'buy' rating on the stock.
"We model the healthcare sale consideration (£945.0m, of which £130.0m is deferred by two years) and the return of £800.0m of proceeds to shareholders. We model a £100.0m share buyback due to complete by September 2025, assume a £600.0m tender offer upon completion of the disposal, and model a final £100.0m share buyback in FY28. Our FY26 forecast of 440.0p EPS assumes circa 10% of growth yoy; circa 3% organic and circa 7% from the impact of share count reduction."
Reporting by Iain Gilbert at Sharecast.com
