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Investing.com -- RBC Capital Markets maintains an “outperform” rating on Just Group Plc (LON:JUSTJ), citing a disconnect between the firm’s fundamentals and its share price performance.
The stock is down 13% year-to-date, in contrast with gains of 6% for the FTSE All Share and 29% for U.K. life insurance peers.
Despite this, RBC sees significant upside, with a price target of 200p, implying 40% potential return from the current 142.60p level.
Just Group trades at 0.4x FY26E price-to-book value, more than 60% below the sector average.
In addition, RBC argues that the valuation underestimates Just’s back book and new business franchise, especially given the company’s projections of 14% annual adjusted book value growth (IFRS NAV + net CSM) from FY24 to FY27.
Underlying operating profit is expected to grow 9% annually over the same period, reaching £660m in FY27.
The company remains a leading player in the pension risk transfer (PRT) market, particularly in small-to-mid-sized schemes.
In 2024, Just completed 129 transactions, 43% of all U.K. PRT deals, thanks to its proprietary Beacon platform.
RBC expects a 7% compound annual growth in new business sales from FY24 through FY27, with FY25 volumes weighted toward the second half.
The new business margin is projected to remain stable at 8.5% in FY25, only slightly below 8.7% in FY24.
RBC anticipates a 14% year-over-year decline in 1H25 underlying profit, but forecasts a recovery in 2H25, supporting 10% growth for the full year. Operating EPS is forecast at 40.2p in FY25, rising to 47.9p by FY27.
Despite increased competition, 11 insurers now participate in the BPA market, Just’s scale, speed and execution capabilities provide a sustained competitive edge.
The market share opportunity remains considerable, with 4,000 of the U.K.’s 5,100 private sector defined benefit schemes still potential targets for buyouts.
RBC also highlights Just’s solid capital position. The Solvency II ratio stood at 204% at the end of 2024 and is projected to remain above 170% through 2027.
New business strain under the regime is expected to hold at 1.5%, reflecting pricing discipline. Adjusted NAV per share is forecast to grow from 253p in 2024 to 375p in 2027.
The investment case, according to RBC, rests on steady compounding growth at a steep discount.