Capex inflation + stable rental rates = returns squeezed for longer?

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Capex inflation + stable rental rates = returns squeezed for longer?

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Sunbelt Rentals

Capex inflation + stable rental rates =

returns squeezed for longer?

Reiterate Rating: UNDERPERFORM | PO: 62.00 USD | Price: 72.90 USD

Return on investment under pressure 21 July 2026

We see ongoing downside risks to Sunbelt Rentals return on investment, reflecting the Equity

ongoing mismatch between inflation in capex/opex and stable rental rates. After

declining to c14% in FY-26 from a peak at c19% in FY-23, we forecast further erosion in

Key Changespre-tax ROIC to reach c13% by FY-29. This would be significantly lower than historical

average of c17%, reflecting net assets growing by c35% over 2023-27E while EBITA has (US$) Previous Current

remained broadly stable. Deteriorating return on investment could imply lower valuation Price Obj. 65.00 62.00

multiples over time, while the stock trades at a small premium to history. 2028E EPS 3.99 3.94

2029E EPS 4.26 4.13

Capex and opex inflation likely to remain elevated…

Capex inflation reflects higher selling price by equipment suppliers, who are facing costs Arnaud Lehmann >>

pressure from higher industrial metals, tariffs, logistic and energy. With Sunbelt Rentals Research Analyst

MLI (UK)

renewing 10-15% of its fleet every year, we believe this inflation could be endemic for +44 20 7995 8302

the coming years, driving higher OEC, but not necessarily rental revenue i.e. declining arnaud.lehmann@bofa.com

dollar utilisation. Sunbelt also faces ongoing opex inflation from higher logistic costs, Allison Sun >> Research Analyst

fleet repositioning and wages, which could remain a headwind to margins. MLI (UK)

+44 20 7996 1052

…while rental rates likely remain stable allison.sun@bofa.com