RS Group (1K) | Hold (vs Buy) | Recovery signs priced in

研报英文原文证据摘录

RS Group (1K) | Hold (vs Buy) | Recovery signs priced in

RS Group Hold | Target Price: 670p

Recovery priced in, awaiting further market momentum

We update our investment thesis and move to a more balanced stance on RS Group, taking a

more cautious view over the next 6-12 months following the strong share price performance

after the FY results and subsequent price normalisation.

This supports our view that the investment case is increasingly balanced: execution is

improving, but the next leg of upside likely requires clearer evidence of sustained volume

recovery and stronger operating leverage. The quality of the results was better than expected,

with momentum improving through H2 and Q4, supported by pricing discipline, active

inventory management and a 60bps increase in gross margin to 43.4%. However, the recovery

remains gradual rather than decisive, with price still doing most of the work and volumes

remaining soft, as like-for-like daily average growth reflected price up c.2% and volumes down

c.2.5%.

We also revisit RS’s relationship with key industrial leading indicators, particularly PMIs and EU

Industrial Confidence, which historically show a close correlation with RS’s market backdrop

and organic performance, albeit with the company typically lagging the cycle by c.3-6 months.

While these indicators are now stabilising and becoming more supportive, they do not yet point

to a clear volume-led recovery, leaving FY 2027 as an intermediate year in which self-help should

continue to progress, but meaningful margin expansion is likely to require stronger end-market

momentum. Against this backdrop, and with geopolitical uncertainty and a higher operating

cost base still weighing on near-term earnings visibility, we downgrade our rating from BUY to

HOLD.