DCC: Model update post FY results

研报英文原文证据摘录

DCC: Model update post FY results

DCC plc

Target/Upside/Downside Scenarios Investment summary

We like DCC given the strength of its operational model,DCC plc

positive return and cashflow characteristics, and the

7,500 125 Weeks 27DEC23 - 18MAY26 consolidation opportunity in its end markets. With strong FCF

7,000 conversion and an uninterrupted dividend growth profile since

6,500 TARGETTARGET 6500.006500.00 IPO, DCC ticks a lot of boxes, in our view. 6,000 CURRENTCURRENT 5950.005950.00

5,500

5,000 Acquisitions: The group operates in highly fragmented

4,500 markets, which should continue to offer significant potential

4,000

3,500 for further consolidation.

3,000

30m Cash: The group has a strong track record of FCF conversion,

20m 10m reflecting both its effective management of working capital

2024 2025 2026 and asset-light operating model. The strong balance sheet

D J F M A M J J A S O N D J F M A M J J A S O N D J F

M A M provides headroom to support the business from both an DCC LN Rel. FT ALL SHARE INDEX MA 40 weeks

Source: Bloomberg and RBC Capital Markets estimates for Target organic and M&A perspective.

Valuation Returns focus: The business generates a good return onWe value DCC using a SOP valuation methodology. Our SOP capital, significantly ahead of its WACC and importantly this

assumes an 27E EBITA multiple of 6.5x for Technology (in forms a key component of management incentive structures

line with peers) and 11.5x for the Energy businesses (a c.15% (c40% of LTIP). Returns in Energy have been the key driver and

discount to peers to reflect the conglomerate nature and lack the strategic decision to focus on Energy should be positive for

of scale in renewables). Our price target of 6500p supports our group returns.

Sector Perform rating.