Citi raises 3i Group stock price target to £50.00 on positive outlook

Citi analysts have raised their price target for 3i Group PLC (LON:III:LN) to £50.00 from £48.50, reiterating a Buy rating, based on a positive outlook for Action, a key portfolio company. While Action's reallocation towards new store openings is creating a temporary drag on like-for-like sales growth (projected at 7.7% for 2025, down from 8.6%), analysts believe the strategy is value accretive, supported by strong demand in Switzerland and Germany and conservative assumptions regarding market space. Action's KPIs are due June 26, with recent weather trends potentially boosting LFL sales growth.

Analysis

Citi analysts have increased their price target for 3i Group PLC (LON:III:LN) to £50.00 from £48.50, while maintaining a Buy rating, primarily driven by a positive outlook for Action, a key retail component within 3i's portfolio. The analysts highlight Action's accelerating pace of new store openings, a strategy considered value accretive despite creating an anticipated 60 basis point drag on like-for-like (LFL) sales growth. Consequently, LFL sales growth for Action is now projected at 7.7% for 2025, revised downwards from a previous estimate of 8.6%. This strategic shift is supported by strong consumer demand in Switzerland and Germany, contributing to a positive long-term store density outlook. Citi also notes that Action’s internal assumptions regarding available market space appear conservative, suggesting potential for further expansion. The revised price target for 3i Group also incorporates the effect of modestly lower risk-free rates. Investors are anticipating Action's key performance indicators (KPIs), due on June 26, with recent weather trends suggesting a potential uplift in LFL sales growth from the 8.1% observed in weeks 13-19.

Key Decisions for Investors

• Investors may consider the reiterated Buy rating and increased price target for 3i Group as supportive of continued confidence in Action's growth strategy and its contribution to 3i's value.
• It is advisable to closely monitor Action's KPI release on June 26, particularly the LFL sales figures and management commentary on new store performance, to assess the execution and impact of its expansion.
• The projected moderation in Action's LFL sales growth to 7.7% for 2025, due to the focus on new store openings, should be weighed against the long-term value accretion potential of this strategy when evaluating 3i Group's prospects.