3i Group PLC (LSE:III) shares topped the FTSE leaderboard on Tuesday after an upgrade from UBS, based on improving growth trends at Action, the Dutch discount retailer that is the largest asset in the private equity group’s portfolio.
UBS upgraded to a 'buy' rating and raised its price target to 4,700p from 4,450p, implying 13% upside.
Analysts said the market's concerns over slowing growth at Action, which had led it to downgrade its rating previously, now appear to be "coming to an end".
The Dutch discount retailer, which makes up more than 70% of 3i’s portfolio, maintained like-for-like sales growth of 6.5% so far in 2025, despite weaker consumer spending in France and Germany.
This gives the analysts confidence in Action’s guidance for mid-to-high single-digit long-term growth.
3i recently raised its stake in Action to 60.1% through a 2.2% purchase from Singapore's sovereign wealth fund, GIC.
UBS said GIC’s choice to receive 3i shares as part of the deal should be seen as a “vote of confidence” in Action’s growth.
UBS also pointed to 3i’s exits of two assets from its 2020-21 vintage at more than 2.5 times money-on-invested-capital was as evidence of broader portfolio strength.
"In a recovering private equity cycle, we see opportunity for 3i to return to high teens percentage return on equity in its portfolio beyond Action, adding 3i NAV and share price valuation support."