RBC Upgrades Legrand to 'Outperform' on Surging Datacentre Demand

RBC Capital Markets on Monday upgraded its rating on French electrical equipment manufacturer Legrand SA to “Outperform” from “Sector Perform,” citing faster-than-expected growth fueled by robust demand from the datacentre sector. The bank also increased its price target on the stock to €160 from a previous €150.

The Datacentre Catalyst

The upgrade follows Legrand's second-quarter results, where it posted organic sales growth of 10.4%, beating consensus estimates by 210 basis points. RBC analysts attributed this strength to the company's rapidly expanding datacentre business, which grew nearly 40% in 2025 and is guided to grow another 25%-30% in 2026.

This segment's contribution to group sales has more than doubled, rising from 15% in 2023 to 32% in the first half of 2026, according to the report. In response to this momentum, Legrand's management raised its full-year 2026 organic growth guidance to a range of 8%-10%, up significantly from the prior 4%-7%. RBC now models a 6% organic sales compound annual growth rate (CAGR) for Legrand from 2026 to 2030.

Valuation Disconnect

RBC highlighted a disconnect between Legrand's strong operational performance and its recent stock valuation. Analysts noted the stock has underperformed the European industrials sector by about 15 percentage points since late June, a move driven by a de-rating rather than weakening fundamentals.

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In fact, consensus adjusted earnings-per-share (EPS) forecasts have risen since the share price peaked in June, with 2026 and 2027 estimates up 2.5% and 3.1%, respectively. RBC's new €160 price target is based on a discounted cash flow model and incorporates 5% and 8% increases to its own 2027 and 2028 EPS forecasts.

Strategic Outlook

Beyond datacentres, RBC pointed to a geographic shift toward North and Central America, which now accounts for 47% of sales compared to 17% in 2012, as a key growth driver. The bank is also cautiously optimistic about a potential recovery in the residential market from multi-year lows.

Investors will be watching Legrand's upcoming Capital Markets Day on September 29, which will focus on its datacentre strategy. RBC believes the event could serve as a positive catalyst, allowing management to address concerns over new technologies like 800VDC architecture, a threat the bank views as manageable for the company.