Barclays starts Rosebank at “overweight,” sees profitability surge to 20% by 2028

Published 09/09/2025, 07:14
© Reuters.

Investing.com -- Barclays has initiated coverage on Rosebank Industries Plc at “overweight,” setting a sum-of-the-parts price target of 430p, in a note dated Tuesday. 

The call represents a 31% upside to the September 8 closing price of 328p and a 43% premium to the company’s placing price.

Rosebank, established in 2024, applies a “Buy, Improve, Sell” model to underperforming industrial and manufacturing companies. 

Its debut acquisition, Electrical Components International (ECI), closed on August 20 for an enterprise value of $1.894 billion, equal to 9.8x 2024 adjusted EBITDA and 9x 2025 estimates.

Barclays noted that the multiple sits below the three-year average of 13x for global industrial deals.

Barclays analysts said the ECI purchase offers “plenty of scope for improvement with an inefficient manufacturing footprint, low profitability per employee vs. other industrial companies and, at this juncture, a less than optimal divisional profit mix.” 

Management aims to lift ECI’s EBITA margin by at least 500 basis points, from 13% in 2024 to 18% within three to five years. 

Barclays projects a sharper rise, forecasting margins of 20% by 2028, a 700bp improvement.

The acquisition is expected to deliver significant shareholder returns. Barclays estimates a 2.4x return on equity invested by fiscal 2028, consistent with Rosebank’s track record. 

The brokerage flagged that at Melrose, the management team achieved an average 27% internal rate of return across businesses sold.

ECI’s financial position is also expected to improve. Under prior owner Cerberus, leverage was around 5x and interest costs absorbed about 11% of debt, resulting in negative net income from 2022 through 2024. 

Under Rosebank, Barclays forecasts leverage falling to 2.7x in 2026 and 1.6x in 2028, with interest expense declining to $45 million from $110 million. 

Earnings are forecast to grow at a compound rate of 22% between 2026 and 2028. The company’s shares closed at 328p on September 8, giving it a market capitalization of £1.33 billion. 

It has 406.61 million shares outstanding and a free float of 96.2%. The stock has traded in a 52-week range of GBP 9.07 to 3.13. 

Dividend yield is currently not applicable, with payouts expected to begin from fiscal 2026.

Rosebank has indicated it plans to pursue additional acquisitions within 12 months. “We expect Rosebank to undertake a second acquisition with management stating that they ‘plan to do another acquisition within 12 months,’” Barclays said, adding that the company has capacity to operate the model across multiple assets.

Barclays added that Rosebank’s valuation reflects strong upside potential. “Our SOTP valuation for Rosebank is 430p, representing +43% upside to the placing price and +31% upside to the current price,” the analysts said.

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