Reckitt Benckiser gets a boost from Exane upgrade

16th Sep 2015 11:31

(ShareCast News) - Reckitt Benckiser got a boost after Exane BNP Paribas upgraded the stock to 'outperform' from 'underperform' and lifted its price target to 6,600p from 5,800p.The bank said its 'underperform' rating had been based on the belief that Reckitt would struggle to execute material near-term M&A given a dearth of suitable available opportunities.With it now over two years since the last meaningful acquisition, Exane claimed a "hollow victory".However, the bank said it materially underestimated the strength of organic growth in the health business. It said that alongside SCA, Reckitt is now the fastest-growing EU health and personal care major and this looks set to continue in the near term.Exane said it sees increasing scope for mid-term M&A, more specifically for Pfizer.The bank said Reckitt is effectively a company of two parts: a consumer health business and a conventional HPC business. While the former has always been viewed as a good business, given both recent organic trading and the digitisation driven change that is impacting mainstream HPC, Exane now reckons it is arguably one of the best businesses within HPC.As such, it argues that Reckitt merits a high multiple. "We believe that around 24x price-to-earnings is not an unreasonable target P/E multiple for Reckitt."At 1142 BST, Reckitt Benckiser shares were up 2.8% at 5,847p.