Barclays eyes substantial upside for Reckitt Benckiser shares

It may take Reckitt Benckiser about three years to turn around its Health division and close the gap with the rest of the market in terms of growth, but success could lift the share price significantly, analysts at Barclays said.

By 2023, they expect the organic rate of sales growth in the consumer goods giant's Health unit to hit roughly 4.0%, versus -0.6% in 2019.

That compared to end market growth of 4.0% in 2019 already.

"New management first needs to avoid further setbacks, then improve underlying operational performance through increasing focus and investment," they said.

"The final stage of turning around RB, in our view, is to improve innovation, which won’t happen overnight given the lead times involved in an R&D pipeline."

In turn, a return to growth for Health would pave the way for a disposal of the company's hygiene and homecare arm, they said.

"If RB can restore Health OSG to the 4-5% of the underlying market, then we believe its substantial discount to best-in-class peers could close, implying 50-60% potential upside over the next three years."

Barclays revised its target price for Reckitt shares from 6,700.0p o 7,000.0p while keeping its recommendation at 'overweight'.