Citi has maintained a positive stance on 3i Group PLC (LSE:III) despite a 13% share price fall following the private equity firm's full-year 2026 results, in which like-for-like growth trends at Action, the discount retailer that dominates 3i's valuation, disappointed the market.
The stock has now underperformed by 50% since growth at Action began decelerating in September 2025.
However, Citi argued that the underlying customer dynamics at Action remain compelling, with the discount format increasingly appealing to more affluent shoppers.
High-income customers have accounted for 50% of new customer growth since 2020, with this segment expanding at three times the rate of low-income households.
The bank acknowledged that cyclical pressures are weighing on existing customer spending, but said it remains convinced that growth will reaccelerate as a broader base of consumers embraces the discount format.
At the current share price, Citi calculated that Action's implied valuation stands at 14.3 times its 2027 net income estimate.
The bank's valuation framework suggests the market is pricing in like-for-like growth of just 2.2% over the medium term, a level Citi views as too conservative given the structural tailwinds behind the business.