RS Group upgraded to buy at Deutsche Bank on strengthening recovery case

RS Group, the FTSE 250 distributor of industrial and electronic products, saw its shares rise 3% after Deutsche Bank upgraded the stock to buy from hold and lifted its target price to 775p from 700p.

The bank’s case rests on an improving outlook for European cyclical companies, which it expects to benefit as industrial confidence rebuilds.

A central plank is the prospect of an end to the Iran war, which the analyst argued should position cyclicals for better performance as faith in industrial activity recovers.

Deutsche Bank had previously been cautious on the risk of spillover from the conflict, but said that concern had not materialised.

Instead, demand has proved robust and purchasing managers’ index readings, a closely watched lead indicator of manufacturing activity, have turned positive.

The bank noted that the international manufacturing cycle has historically explained two-thirds of RS Group’s growth, given its exposure to short-cycle industrial and maintenance, repair and operations demand.

On that basis, and drawing on recent survey data, its model now implies like-for-like growth of 4% is achievable in the 2027 financial year.

The analyst added that the group would also lap a set of self-inflicted execution problems from the prior year through the period, providing further support to growth.

The shares were changing hands for 600p each.