Barclays Initiates Rosebank Coverage at “Overweight,” Forecasts Profitability Surge by 2028
Barclays has initiated coverage of Rosebank Industries Plc with an “overweight” rating and set a sum-of-the-parts (SOTP) price target of 430p, according to a note released Tuesday. The valuation points to a 31% upside from the September 8 closing price of 328p and a 43% premium over the company’s placing price.
Rosebank’s Growth Strategy and First Acquisition
Founded in 2024, Rosebank follows a “Buy, Improve, Sell” strategy focused on turning around underperforming industrial and manufacturing companies. Its first acquisition, Electrical Components International (ECI), was completed on August 20 for an enterprise value of $1.894 billion. This deal valued ECI at 9.8x 2024 adjusted EBITDA and 9x 2025 estimates—below the three-year global industrial average of 13x.
Barclays analysts highlighted that ECI presents strong opportunities for improvement. Challenges include an inefficient manufacturing base, weaker profitability per employee compared to industry peers, and a suboptimal divisional profit mix.
Margin and Profitability Outlook
Management has targeted an EBITA margin increase of at least 500 basis points, aiming to lift margins from 13% in 2024 to 18% within three to five years. Barclays is more optimistic, forecasting margins at 20% by 2028, representing a 700 basis point rise.
The acquisition is also expected to drive meaningful shareholder returns. Barclays estimates a 2.4x equity return by fiscal 2028, in line with Rosebank’s historical performance. At Melrose, the current management team achieved an average internal rate of return (IRR) of 27% on prior business sales.
Financial Strengthening and Debt Reduction
Rosebank’s acquisition is expected to strengthen ECI’s financial position. Under former owner Cerberus, leverage was nearly 5x, with interest costs consuming 11% of debt and leading to negative net income from 2022 through 2024.
Barclays forecasts leverage falling to 2.7x by 2026 and 1.6x by 2028. Interest expense is also projected to drop significantly, from $110 million to $45 million. Earnings are expected to grow at a compound annual rate of 22% between 2026 and 2028.
Market Valuation and Future Plans
As of September 8, Rosebank’s shares closed at 328p, giving the company a market capitalization of £1.33 billion. It has 406.61 million shares outstanding and a free float of 96.2%. The stock’s 52-week range stands between GBP 9.07 and 3.13. Dividends are not yet applicable, with payouts anticipated from fiscal 2026.
Looking ahead, Rosebank is planning further expansion. Management stated they intend to complete another acquisition within the next 12 months, with capacity to apply their model across multiple assets. Barclays reaffirmed its positive outlook, reiterating its 430p price target, which represents both a 43% upside from the placing price and a 31% gain from the latest closing price.
