Luceco PLC (LSE:LUCE) expansion into electric vehicle charging and home energy management markets should help drive earnings growth and a higher valuation, according to RBC Capital Markets, which has initiated coverage of the electrical products group with a 'buy' rating.
RBC set a 320p price target, implying around 19% upside from the current share price of 270p.
Analyst Andy Douglas said Luceco's core business remains "robust", supported by strong market positions, recognised brands and healthy cash generation. However, it believes the company's growing exposure to energy transition markets offers a significant additional growth opportunity.
The portfolio of electrical and lighting brands include BG Electrical, Masterplug and Luceco, while its newer Sync Energy division is focused on energy transition.
These energy transition activities, including EV charging, home energy management and demand flexibility (DF) services, account for around 11% of group sales and more than 20% of earnings, Douglas estimates.
Structural growth trends linked to the electrification of homes and transport should support demand over the medium and long term, he said.
Positive trading momentum was highlighted, with first-quarter sales growth running at a low double-digit percentage rate and earnings forecasts already upgraded by 19% this year.
Adjusted operating profit of £41 million is RBC's forecast for the 2026 financial year, up 21% year-on-year and ahead of management's guidance of at least £40 million with scope for "significant outperformance" that is dependent on DF.
Cash generation also remains a key attraction, according to Douglas, estimating Luceco will finish the 2026 financial year with net debt equivalent to 1.1 times earnings, leaving capacity for up to £100 million of acquisitions by 2030.
The broker said the shares remain attractively valued given the group's growth prospects and exposure to energy transition themes.
