Deutsche Bank upgrades Legrand on data center growth, building recovery; shares up

 Shares in Legrand jumped more than 2% after Deutsche Bank upgraded the French electrical equipment maker to "buy" from "hold" and raised its price target to €160 from €150, saying its organic growth dynamics are stronger than ever even though 70% of its revenue base, exposed to buildings, is not yet contributing.

Deutsche Bank analysts said Legrand’s historical 20% price-to-earnings premium to the sector average has "vanished," which they called unjustified given the company’s growth prospects.

The bank cited three drivers behind the upgrade. Legrand’s fastest-growing segments, data centers, energy transition and digital lifestyles, now represent around 60% of group sales, up from 30% in 2020. 

Deutsche Bank expects management to upgrade its 2025-30 organic revenue growth guidance to 5%-7% from 3%-5% at an upcoming Capital Markets Day.

The bank also pointed to a recovery in the European residential construction market, saying it appears to have bottomed out after a period in which performance was particularly weak in the first half of 2026, with margins compressing to levels not seen since the pandemic. 

Deutsche Bank said last year’s recovery in housing starts and transaction volumes points to stronger demand for Legrand’s products, which could show up as early as the second half of 2026 given a typical 12-month lag.

Legrand’s data center business, which now accounts for 32% of group revenue, grew nearly 40% in 2025 and is expected to grow another 30% in 2026 to reach sales of about €3.5 billion, the broker said. 

Management estimates a shift to DC power systems will negatively affect only 20% of data center sales, mainly rack power distribution units and uninterruptible power supplies, while benefiting the rest of the portfolio.

Deutsche Bank said the stock trades at a 2027 estimated price-to-earnings ratio of 20 times and enterprise value-to-EBITA of 15 times, a 6%-7% discount to its 10-year historical averages and a 20% discount to electrical equipment peers. 

The brokerage said it sees scope for a gradual re-rating as both data center and building markets grow simultaneously over the next 12-18 months.

The new price target is derived from the midpoint of two valuation approaches: a 2027 EV/EBITA peer multiple comparison applying a 20% premium to reflect Legrand’s free cash flow generation, and a five-year discounted cash flow analysis using a weighted average cost of capital of 7.7%, lowered from 7.8%.

Deutsche Bank flagged downside risks including greater-than-expected weakness in construction markets due to higher interest rates, rising competition and lower operating leverage than expected as the company invests in electronics, software and additional data center capacity.