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Investing.com - Citi downgraded RENK Group AG (ETR:R3NK) from Buy to Sell on Tuesday, while simultaneously raising its price target to EUR61.00 from EUR34.60.
The German defense equipment manufacturer’s stock rating was cut despite the significant price target increase, suggesting Citi believes the current market valuation exceeds even its higher projections for the company.
Citi’s analysis indicates RENK would need to achieve either a 16% profit compound annual growth rate (CAGR) from 2030 to 2034 (versus 8.4% in their model), 125% cash conversion (versus 90%), or a weighted average cost of capital (WACC) of 7.6% (versus 9%) to justify a Buy rating.
The new EUR61 target price is based on European defense spending driving double-digit growth for five years, with a projected 16.5% five-year profit CAGR followed by 8.4% growth through 2034, according to the investment bank’s discounted cash flow valuation.
Citi’s model assumes European defense spending will increase from approximately 2% of GDP currently to around 3.5% by 2034, with the target price equivalent to a 2025 estimated enterprise value to earnings before interest and taxes (EV/EBIT) multiple of approximately 25.5x.
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