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On Friday, Morgan Stanley (NYSE:MS) analysts resumed coverage on DSV A/S (DSV:DC) (OTC:DSDVF), issuing an Overweight rating with a price target of DKK 1,750. The firm’s analysis points to DSV’s strong performance relative to its competitor, Schenker, noting a significant margin gap that DSV has maintained over the past decade.
DSV’s EBIT margin for 2023 was reported at 11.8%, which stands in contrast to Schenker’s 5.9%. Morgan Stanley highlights that the margin gap between DSV and Schenker has averaged around 400 basis points over the last ten years and has widened in recent times.
The analysts at Morgan Stanley have taken into account DSV’s strategy to further close this margin gap. The company aims to achieve this through the realization of DKK 9 billion in synergies. These synergies are expected to be comprehensive, encompassing the consolidation of operations, logistics facilities in Road and Solutions, back-office functions, as well as finance and IT infrastructure.
Morgan Stanley’s analysts find the synergy targets credible, especially when considering DSV’s successful history of enhancing margins following previous acquisitions. The firm’s base case includes all the synergies that DSV has targeted.
The report concludes with an optimistic outlook on DSV’s synergy ambitions, suggesting that they may even be understated when compared to the company’s performance after past deals. Morgan Stanley’s stance indicates a belief that DSV could potentially surpass its synergy targets in the long term.
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