The new rating is “equal weight”, down from “overweight” with the bank noting that mergers & acquisitions activity has been more subdued than it expected since DCC’s share placing back in 2018, while organic growth in recent years has been tracking below management’s guidance.
The DCC management had been hoping that around one-third of top-line growth would be organic, i.e. not contributed by newly acquired companies.
“With ROIC [return on capital invested] gently declining in the last few years, question-marks about the future growth prospects for some divisions and a relatively unattractive ESG [Environmental, social and governance] profile compared with other stocks in the sector, we struggle to see significant upside,” Barclays said.
The price target has been slashed to 6,900p from 8,100p.
Shares in DCC fell 1.3% to 6,680p in early deals.