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On Tuesday, BofA Securities adjusted its stance on RENK Group AG (R3NK:GR), downgrading the stock from Buy to Underperform, despite increasing the price target to EUR 73.00 from the previous EUR 58.50. The revision comes amid a reassessment of the company’s growth prospects and market valuation.
Carlos Peris of BofA Securities pointed out that RENK has a positive growth outlook through to 2030, with expectations of over 17% growth from 2025 to 2030. However, he expressed concern that the current stock price has already factored in these prospects, noting RENK’s significant outperformance relative to its sector year-to-date, with shares up approximately 329% compared to the sector’s 101% increase.
Peris highlighted that RENK’s organic sales could reach EUR 3 billion by 2030, a key point of focus for the company’s November Capital Markets Day. Despite this, the analyst indicated that the current market expectations might be too optimistic given RENK’s valuation, which trades at about a 33% premium over the sector based on 2027 enterprise value to earnings before interest and taxes (EV/EBIT) estimates by BofA.
Looking ahead, Peris suggested that market sentiment might shift towards companies with stronger defense electronics, air defense, and strike capabilities in the second half of 2025. This anticipated shift could impact RENK, which has assets more exposed to shorter cycles and land operations.
In light of these factors, BofA Securities has raised its growth estimates for RENK’s Vehicle and Marine Systems (VMS) and Mechanical and Instrumental (M&I) divisions, as well as margin expectations for VMS. This led to an increase in estimated growth rates ranging from 0% to 11% for 2025-2030.
To account for the anticipated higher top-line growth through 2030, BofA Securities also increased the target multiple for RENK from 15.6x to 16.3x, representing a 25% premium over the cycle multiples. This adjustment in valuation multiples, combined with rolling forward the valuation year to 2030, contributed to the raised price target of EUR 73.00.
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