Rektron Group Inc. – Initiating Coverage with a BUY Recommendation and a $6.00 Target Price
We are initiating coverage of Rektron Group Inc. with a BUY recommendation and a target price of $6.00 per share. Companies operating in the commodity trading, banking, and brokerage industries are valued at approximately 11.5x their projected 2026 EB1TDA. To derive our $6.00 target price, we applied an 11.5x EBITDA multiple to our F2026 forecasts.
Solid growth fundamentals will lead to strong revenue and earnings growth through F2026
Rektron Group Inc. is a leading global trader of metals and energy commodities, including recycled metals and EURO VI-compliant fuels. With operations in 10 countries, the company excels in logistics, risk management, and dean energy initiatives. Planned expansions into renewables and mining, industrial and recycled assets position Rektron for strong revenue and earnings growth over our forecast period.
Rektron Group Inc. employs a distinctly risk-averse and conservative approach in its risk management practices, focusing on minimizing exposure to price and currency risks in commodity trading. The company mitigates market volatility by utilizing futures and derivatives through trusted brokerage partners, a strategy not all industry participants can access due to stringent credit requirements. This approach is reinforced by a specialized trading team dedicated to precise risk oversight. In addressing currency risks, Rektron hedges exposures by engaging in currency futures and derivatives trading, given that commodity pricing is predominantly in US dollars while operational expenses and buyer preferences may involve local currencies. These structured measures reflect Rektron’s commitment to operational efficiency and financial resilience, underscoring its conservative philosophy and prudent business approach. By maintaining robust risk management strategies, Rektron ensures greater financial predictability and stability, safeguarding its operations in a volatile market environment.
We forecast strong growth through 2026, with revenue increasing from $2.8 billion in 2025 to $3.1 billion in 2026, driven by expanded metals and energy trading. Gross profit is projected to rise from $40.1 million to $44.8 million, maintaining a 1.4% margin. EBITDA is forecasted to grow from $27.7 million to $32.9 million, reflecting operational efficiencies. Earnings per share are set to increase from $0.21 in P2025 to $0.29 in F2026.
Our forecasts do not account for acquisitions that will enhance core trading activities and strengthen the balance sheet with non-current assets. This improved financial position should enhance the company’s standing with banks and financial institutions, potentially increasing access to working capital facilities. Notably, on February 5, 2025, Rektron announced a non-binding term sheet to acquire a 68% stake in R.K. Batra Group (Batra), a prominent India-based LPG company. This strategic move aims to leverage Batra’s market presence in India and further diversify Rektron’s portfolio.
This report has been created by analysts who are employed by Research Capital Corporation, a Canadian Investment Dealer. For further disclosures, please see the Company Related Disclosure section of the report.
