Broker tips: DCC, Pagegroup, Hays

(Sharecast News) - Analysts at Berenberg lifted their target price on energy sales and distribution business DCC from 6,300p to 6,700p on Wednesday as they highlighted what they see as a "meaningful opportunity" for the group as it transitions into a pure‑play energy business. Berenberg said DCC's FY26 results showed a resilient performance during a period of major strategic change, with adjusted underlying earnings from continuing operations rising 3.6% year‑on‑year to £634m and the group returning £700m of capital from recent disposals.

Berenberg noted that management remains on track to become a dedicated energy group by the end of the calendar year and continues to target £830m of adjusted EBIT by FY30 - implying a doubling of energy division profits from FY22. It also pointed to the division's long‑term metrics, including a ten‑year ROCE of 18.7%, a 10.4% EBIT compound annual growth rate and 99% free‑cash‑flow conversion, as evidence of its quality.

The German bank said DCC was well placed to benefit from shifting customer priorities within the energy "trilemma", with security of supply and affordability now in sharper focus amid geopolitical tensions. It also argued that the group's multi‑energy offering and broad supply‑chain access position it strongly for medium‑term demand.

Berenberg, which reiterated its 'buy' rating on the stock, left its core forecasts largely unchanged, making only housekeeping adjustments, and said DCC's long‑standing growth algorithm of 3-4% organic growth plus 6-8% M&A has delivered around 12% adjusted EBIT CAGR over more than three decades.

It also referenced the ongoing bid situation, after DCC rejected an unsolicited £58‑per‑share approach from KKR and Energy Capital Partners in May, saying the proposal "fundamentally undervalued" the group.

Morgan Stanley reiterated its 'underweight' rating on PageGroup on Tuesday and slashed the price target, as it "neutralised" its rating on recruitment peer Hays to 'equalweight' from 'underweight'.

In a research note on European staffers, the bank cut its price target on PageGroup to 110p from 195p and on Hays to 35p from 44p.

Despite the recent improvement in organic growth across the staffing space, mainly driven by better temporary staffing, Morgan Stanley reiterated its cautious stance on the sub-sector.

"The macroeconomic and geopolitical environment has become more uncertain and could take a toll on the recruitment/ staffing market, something we think has not yet been fully reflected in consensus expectations," it said. "Concerns over the AI risk in the mid-term also remain and could continue to weigh on valuation, together with short-term macro headwinds."

Morgan Stanley said the lack of positive share price reaction to recent organic growth beats across the space suggests investors are looking for gross margin recovery and better operating leverage to turn more positive.

"However, we believe the macro/geopolitical backdrop and recent labour market data point to a risk of further deterioration of perm recruitment, which would in turn continue to put pressure on staffers' gross margin and operating profit. We therefore see limited positive catalysts for staffing names to re-rate over the coming earnings season."

It also neutralised its rating on Hays to 'equalweight' and reiterated its 'underweight' stance on PageGroup, "which has the largest exposure to perm recruitment and higher risk of additional dividend cuts", in its view.