(Alliance News) - RS Group PLC may face strains on margins in the coming financial year but analysts at Liberum think its track record demonstrates that this is a business with "many levers to pull."
"Every line of the P&L is latent with longer-term upside potential," the broker feels.
On Tuesday last, the London-based industrial and electronics products distributor said revenue for the year ended March 31 grew by 17% to GBP2.98 billion from GBP2.55 billion a year prior, citing strong growth across its industrial product ranges in the Americas, Europe, Middle East & Africa and Asia Pacific regions.
Pretax profit was GBP383.0 million, up 24% from GBP308.8 million in financial 2022.
Liberum cut its financial 2024 adjusted pretax profit forecast by 3% on the back of the numbers but remains around 4% ahead of guidance.
The broker pointed out the contribution from the Distrelec acquisition was offset by a more cautious like-for-like sales assumption.
Liberum thinks there are levers that management could pull on cost but, at the same time, the focus is on continuing to invest in people and infrastructure to support long-term growth.
The broker cut its price target to 1,460 pence from 1,470p but retained a 'buy' rating.
"It is still early days for the newly appointed CEO, Simon Pryce, but he has reiterated the long-standing targets of organic revenue growth at >2x the market," Liberum said.
"There will be greater focus on prioritising strategic initiatives and improving execution."
"The strategy has been well-set and we see no need for change," Liberum said.
Shares in RS Group rose 1.0% to 805.40 pence in London on Friday.
By Jeremy Cutler, Alliance News reporter
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RS Group (RS1)