Macquarie tips 28% upside for this ASX 200 stock after reviewing its FY25 result
The S&P/ASX 200 Index (ASX: XJO) is climbing higher again today. At the time of writing, the index is 0.22% higher, and up 11.47% over the past year.
But there is one ASX 200 stock travelling in the opposite direction.
The Reliance Worldwide Corp Ltd (ASX: RWC) share price is in the red at the time of writing this morning, down 3.38% to $4.145.
It's a sharp 9.9% drop from where the share price was on Monday this week.
What has caused the decline?
The plumbing parts company revealed its FY25 results yesterday morning, posting a 5.5% lift in sales and a 13.5% rise in reported net profit after tax. Adjusted net profit after tax was just 0.5% higher.
The company decided not to give an outlook on guidance for FY26 revenue or earnings expectation, citing "uncertainty around the immediate economic outlook in each of these key markets".
Investors are clearly concerned. By lunchtime yesterday, the company's share price had dropped 8%, and the trend has continued through to this morning.
Macquarie's stance on the ASX 200 stock
Despite the drop in investor confidence following RWC's financial results, Macquarie Group Ltd (ASX: MQG) is still positive about share price growth over the next 12 months.
In a note to investors today, the broker has confirmed its outperform rating on the stock. At the same time, it lowered its target price to $5.30, down from $5.50 in May.
Despite the lower valuation, the new target price still represents an impressive potential 27.9% upside for investors over the next 12 months.
"Valuation: We lower our SOTP-based TP to $5.30ps (from $5.55ps) on unchanged FY27E multiples (and discounting back to 12-months out). Our TP implies a 12.8x FY27E EV/EBIT vs an average ~14.4x NTM EBIT since listing," Macquarie said in its note.
"OP. A weak market context is not much of a surprise, but the stock corrected after a good run into results. We maintain that RWC is well positioned for eventual recovery and valuation is attractive – at 13.6x NTM EV/EBIT, a ~10% discount to RWC's nine-year average, ahead of a cyclical recovery."
What else did Macquarie say?
Macquarie explains that the business looks well-positioned for volume recovery and therefore the broker believes any indication of improving positions will be positive for the stock.
"Monetary policy could certainly help, but consumer confidence improvement seems a key pre-requisite for volume lifts in key end markets," it said.
Macquarie also points out that the business has cut costs, lifted its 2H FY26 cash conversion, and reiterated its mitigation outcomes on tariffs by FY27.
"A guide for a lesser US$25-30m FY26 impact includes current tariff settings, including copper impost. A strategic approach with customers to the commercial complexities should stand RWC in good stead in the medium term."
The post Macquarie tips 28% upside for this ASX 200 stock after reviewing its FY25 result appeared first on The Motley Fool Australia.
Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Reliance Worldwide. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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