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Investing.com - RBC Capital upgraded Downer EDI Ltd (ASX:DOW) (OTC:DNERF) from Sector Perform to Outperform on Tuesday, raising its price target to AUD6.75 from AUD5.75.
The infrastructure services company has removed approximately AUD200 million in costs while also divesting underperforming contracts and joint ventures, according to RBC Capital’s analysis.
RBC Capital highlighted "significant opportunities" in both Australia and New Zealand markets, which represent approximately 30% of Downer EDI’s group revenue, noting these opportunities are "underappreciated" by investors.
The firm believes Downer EDI’s de-levered balance sheet could enable capital management initiatives in the company’s fiscal year 2025 results, with RBC’s models suggesting the company will achieve its FY25 EBITA margin target of greater than 4.2%.
RBC Capital identified the FY25 financial results and potential Defence contract announcements as the next catalysts that could drive Downer EDI’s stock performance.
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