DCC rallies as Berenberg and RBC weigh in after capital markets day

DCC racked up healthy gains on Friday as Berenberg said it remains one of its top picks in business services and as RBC Capital Markets highlighted a good buying opportunity following the company's capital markets day.

Berenberg said the company did a good job of illustrating its meaningful opportunities for profitable growth - both organically and inorganically - with management keen to stress the importance of the former.

"In our view, DCC also demonstrated its capability, with an experienced long-serving management team that is able to execute and deliver profitable growth across the portfolio, with returns well in excess of the cost of capital," it said, as it reiterated its 'buy' rating and 8,700p price target on the stock.

In addition, the bank said there is upside to the current share price given the opportunity for further high return, earnings-accretive M&A.

"As well as inorganic growth, we think there could be upside organically, particularly if DCC’s healthcare or technology businesses grow faster than expected and represent a larger share of the group," Berenberg said.

Meanwhile, RBC Capital Markets reiterated its 'outperform' rating on the stock after the CMD. It said that given that the current valuation gap with other compounding growth names looks too great, DCC is a good buying opportunity at current levels.

It said key takeaways from the CMD centred on the solid organic outlook, opportunities to extend the scope of its existing markets and the ongoing consolidation opportunity.

"What also came across was the strength of the senior management team, the majority of which have been with the group for a significant amount of time, an obvious positive and a clear differentiator, in our view.

"Whilst not all divisions are on the same growth trajectory, there was a reassuring message on how they can continue to grow profits and sustain its return on capital employed track record."

At 1540 BST, the shares were up 2.8% to 7,125p.