RXL: Share Momentum Will Fade As Pricing Traction Weakens

We raise our Rexel price target by EUR 5 to EUR 25. This reflects analysts' view that modestly stronger long term revenue growth and a higher justified earnings multiple offset near term caution following recent Hold and Equal Weight ratings and largely unchanged Street price objectives around EUR 28 to EUR 30.

Analyst Commentary

Recent Street research has turned more cautious on Rexel, with several bearish analysts signaling limited upside from current levels. While headline price targets around EUR 28 to EUR 30 remain above our revised EUR 25 objective, the tone of recent ratings and target moves highlights growing concern around the balance of risk and reward.

Bearish analysts argue that the strong share performance and prior execution gains already reflect much of the near term improvement in fundamentals. They point to slowing momentum in pricing power and questions over the durability of end market demand, particularly in residential exposure, as reasons to temper expectations.

In addition, fresh coverage in the sector has tended to emphasize that a cyclical recovery in key European markets is now largely embedded in consensus forecasts and valuation multiples. This has contributed to a shift from more constructive stances toward neutral positions, even where formal price targets have not moved materially.

Bearish Takeaways

• Bearish analysts see limited incremental pricing traction versus prior quarters, reinforcing concerns that further margin expansion may be harder to achieve and sustain.
• The view that a European residential recovery is already priced into the shares raises downside risk to valuation if macro conditions or volume trends disappoint.
• Stability of headline price targets around EUR 28 to EUR 30, alongside rating downgrades, suggests a de facto cap on near term upside as execution must now catch up to elevated expectations.
• Modest target cuts, framed as fine tuning rather than thesis changes, still point to a more balanced risk profile, with greater scrutiny on delivery against growth and margin assumptions.

What's in the News

• Rexel confirmed its earnings guidance for fiscal 2025, now expecting slightly positive same day sales growth, narrowed from prior guidance of stable to slightly positive (Key Developments).
• The Board of Directors will meet on October 14, 2025, to consider and approve the appointment of Robert Schuchna as a nonindependent Board member, effective October 15, 2025 (Key Developments).

Valuation Changes

• The Fair Value Estimate has risen significantly from approximately €20.07 to €25.00, reflecting a higher intrinsic value assessment for Rexel.
• The Discount Rate has fallen modestly from about 8.75 percent to 8.45 percent, implying a slightly lower perceived risk profile or cost of capital.
• Revenue Growth has risen moderately from around 1.62 percent to 2.01 percent, signaling a somewhat stronger long term top line outlook.
• The Net Profit Margin has edged down slightly from roughly 4.37 percent to 4.12 percent, indicating a modestly more conservative profitability assumption.
• The Future P/E has increased meaningfully from about 8.5x to 11.1x, suggesting a higher justified earnings multiple in the updated valuation framework.