Deutsche Bank Upgrades 3i Group to "Buy," Citing Strong Long-Term Growth Prospects

November 06, 2024 12:20 AM PST | By Team Kalkine Media

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Deutsche Bank Upgrades 3i Group to — Image source: shutterstock

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Highlights:

Upgraded to "Buy": Deutsche Bank elevates 3i Group from "hold" to "buy," noting attractive long-term growth potential.

Action Drives Growth: Investment in European retailer Action cited as key driver of anticipated EBITDA growth.

Steady Returns Forecast: Consistent returns expected from 3i’s investments in Infrastructure and Scandlines.

Deutsche Bank has upgraded private equity firm 3i Group (LSE:3IN) to a "buy" rating, reflecting its optimism over the firm’s investment strategy, particularly its stake in European discount retailer Action. The bank’s analysts see strong long-term growth potential for 3i, supported by the operational resilience and customer-centric model of Action. This upgrade reflects confidence that Action’s performance will continue driving robust EBITDA growth, buoyed by the retailer’s ability to maintain its competitive edge across European markets.

Action’s appeal lies in its well-defined operating model and established store rollout capabilities, which, according to Deutsche Bank, enable it to achieve strong sales growth per store. The retail chain’s ability to attract a steady stream of customers through its value-driven proposition gives it an edge in an evolving retail landscape. Deutsche Bank anticipates that Action’s cash distributions will cover 3i’s carried value within the next nine years, underscoring the sustainability of its growth trajectory.

Beyond Action, Deutsche Bank’s analysis suggests that 3i’s portfolio presents stable return opportunities. Investments in Infrastructure and ferry operator Scandlines are expected to deliver consistent returns, supporting 3i’s overall performance. These sectors, known for their resilience and long-term demand, add balance to 3i’s portfolio and enhance the stability of its revenue streams.

With this positive outlook, 3i shares saw an uptick of 4.6% to 3,492p, as of 1545 GMT, reflecting investor confidence in Deutsche Bank’s favorable reassessment. The bank’s endorsement signals a belief in 3i’s ability to sustain growth through strategic investments and positions the firm as a potentially strong performer in the private equity sector.

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