RBC Capital Markets launched coverage of Assa Abloy AB with an "outperform" recommendation and a SEK400 price target, a level that implies about 20% upside from the stock's trading price of SEK338.10. That share price currently sits at roughly a 5% discount to the STOXX 600 Industrials index, a contrast to the average 14% premium Assa has carried over the past ten years, according to RBC's estimates.
The broker noted the group's current valuation sits at 16.2x EV/EBIT, which it regards as near a 10-year record low relative to the industrials sector. RBC added that even if the multiple remains unchanged, its model points to an approximate 11% annual total shareholder return.
RBC highlighted Assa Abloy's cash generation as a distinguishing feature. The firm estimated that free cash flow has compounded at about 10% since 2005, with an average conversion rate of 116%. In RBC's view, that performance represents "by far the best volatility-adjusted FCF profile among peers" within a 16-company capital goods peer group.
The SEK400 price target is built on a two-part valuation approach. First, RBC applies a 12x EV/EBITA multiple to the organic business, which reflects an assumed 4% organic sales compound annual growth rate through 2030. Second, the broker assigns SEK170.44 billion in present value to potential bolt-on acquisitions.
RBC's base-case M&A assumptions model 4 percentage points of annual sales growth coming from acquisitions, with deals executed at an assumed 2x EV/sales multiple. In an upside scenario where M&A contributes 5 percentage points of growth annually and acquisitions are completed at a 1.90x multiple - parameters the broker says "only reflect what Assa Abloy has actually achieved since 2004" - RBC arrives at a SEK470 per share valuation, which would imply about 41% upside.
Historical contribution from acquisitions is material to RBC's thesis. The broker says M&A has averaged 5 percentage points of annual sales growth from 2004 through 2025, nearly double the roughly 3 percentage points per year of organic growth reported by the company and estimated by RBC. Based on its modelling, RBC attributes roughly 25% of Assa Abloy's current enterprise value of SEK428.92 billion to M&A-related value creation, through multiple arbitrage and cost synergies.
Geographic mix and margin progression are central to the view that profitability can improve. North America's share of group sales rose from 28% in 2011 to 53% in 2025, a shift RBC expects to support margin expansion. The broker forecasts the group adjusted EBIT margin will reach the upper end of management's 16%-17% target by 2027, helped by the tilt toward higher-margin divisions.
Segment-level margins in 2025 underline that point: OS Americas posted an 18% adjusted EBIT margin, Global Technologies delivered 17.8%, and Entrance Systems recorded 17.2%, all above the group's 16.2% average.
RBC's forward-looking financials include a 2026 revenue projection of SEK156.99 billion, adjusted earnings per share of SEK15.51, and free cash flow of SEK20.14 billion. On the balance sheet, net debt stood at SEK57.34 billion as of 2025, equivalent to 1.9x adjusted EBITDA in the broker's calculations.
Alongside its upside scenarios and valuation work, RBC flagged risks that could affect the investment case. Specifically, the broker cited the potential for weaker construction activity in Europe and North America, the danger of failed M&A integration, and the possibility of sector-wide multiple compression as downside threats to returns.
Context for investors
- RBC views Assa Abloy as trading at an unusually low relative valuation versus European industrial peers, which underpins the re-rating argument.
- Acquisitions are a central pillar of projected growth, with historical M&A performance used to justify optimistic upside scenarios.
- Margin improvement is expected from a geographic mix shift toward North America and above-average divisional profitability levels observed in 2025.