Why We Like R&S
R&S Group Holding AG (SWX: RSGN) is a rare beast in Europe’s energy transition. It designs and builds medium- and high-voltage transformers. Its footprint spans Switzerland, Poland, Croatia, Ireland, and Finland. It serves utilities, industrial clients, and renewable developers.
The company is sitting on a huge structural tailwind. Europe’s grids are old, and demand for electricity is rising faster than ever. Renewable energy integration, electric vehicles, and digital infrastructure growth are pushing the need for more reliable transformers. R&S has the plants, the product range, and the long-term relationships to capture all of this demand.
Here’s the quick take:
- Structural tailwinds: Grid renewal, EVs, data centers, and decentralized renewables support multi-year growth.
- Operational edge: Fully integrated product portfolio, top-quartile margins, and strong customer relationships.
- Revenue visibility: CHF 320m backlog covers most of FY 2026 production.
- Valuation: Trades at ~11× EV/EBITDA 2026E vs. 17× for peers. Berenberg’s CHF 40 target implies >100% upside.
- Market overreaction: A 30% drop after an “immaterial” guidance update creates a high-conviction buying window.
Company Overview
R&S isn’t just another industrial manufacturer. It is a full-service transformer solution provider. Its six plants give it geographic reach, operational flexibility, and risk diversification across multiple countries. This is particularly important in a sector where lead times matter and supply chain disruptions can impact delivery.
The 2024 Kyte Powertech acquisition expanded its footprint into higher-voltage applications. Combined with its existing portfolio—from 50 kVA to 250 MVA, including dry-type, cast-resin, and oil-filled transformers—R&S is one of the few mid-cap companies in Europe that can offer a complete, end-to-end solution.
Long-term contracts with national grids, industrial OEMs, and renewable developers provide recurring revenue streams. These contracts give the company high visibility into both volume and pricing, which is particularly valuable in a capital-intensive sector like transformer manufacturing.
Structural Tailwinds
The growth runway for R&S is extremely visible:
- Grid renewal: Roughly 30% of Europe’s electricity grid is over 40 years old. Transformers are critical for replacing aging infrastructure. Many of these grids were built in the 1970s and 1980s. Without updates, reliability risks increase, especially as energy demand surges. R&S is perfectly positioned to benefit.
- Electrification & data centers: EV adoption, heat pumps, and data-center expansion are driving electricity consumption higher. This creates both volume growth and pricing power for transformer manufacturers. Companies with the capacity to scale production while maintaining quality are rare, and R&S is one of them.
- Decentralized renewables: Tens of thousands of new connection points across Europe are required for solar, wind, and other renewable projects. Each connection requires medium- or high-voltage transformers. For R&S, this translates into repeatable, long-term demand, particularly for high-margin cast-resin and oil-filled units.
Berenberg estimates that European grid investment could exceed €12 billion through 2027. That is a multi-year runway for R&S’s core products, ensuring sustained visibility into both revenue and margins.
Competitive Advantages
R&S has built a durable competitive moat.
- Pan-European footprint: Six strategically located plants reduce logistics costs, speed delivery, and provide localized customer support. This also limits disruption risk from any single country.
- Full product range: 50 kVA–250 MVA, dry-type, cast-resin, and oil-filled transformers. Customers can get everything from one supplier, which increases stickiness and recurring business.
- Technology edge: High-value cast-resin transformers command premium margins. They also meet stringent environmental and safety standards, which increasingly matter to utilities and industrial clients.
- Operational efficiency: The Poland Krzeczów facility and ongoing debottlenecking projects boost throughput, shorten lead times, and increase profit. Scale matters in this industry, and R&S has been relentless in improving efficiency.
These advantages allow R&S to maintain top-quartile margins and pricing discipline even in competitive markets and despite low-cost competition from Asia.
Operational Momentum & Backlog
R&S has a diverse customer base spanning national grids, renewable developers, and industrial OEMs.
Key points:
- Backlog: CHF 320m, covering most of FY 2026 production. This gives the company both revenue visibility and leverage in pricing.
- Revenue growth: Expected CAGR of 10–13% through 2027, supported by both price and volume.
- Capacity utilization: Near 100% at key plants, highlighting the importance of ongoing capacity expansion.
Strong backlog coverage also allows R&S to pass on raw material cost inflation through contracts. This reduces earnings volatility and ensures consistent cash flow.
Operational and Financial Highlights
| Metric | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|
| Sales (CHF m) | 283 | 421 | 468 | 510 |
| EBITDA margin | 23.9% | 21.8% | 21.0% | 21.3% |
| EBIT margin | 22.2% | 19.7% | 18.8% | 19.0% |
| EPS (CHF) | 1.25 | 1.58 | 1.71 | 1.92 |
| Net debt / EBITDA | 1.4× | 1.0× | 0.7× | 0.2× |
| EV / EBITDA (2026E) | ~10.9× | Peers ~17× | — | — |
Source: Berenberg Initiation (Oct 2025) and Flash Update (Nov 2025)
Operational KPI
| Metric | FY 2023A | FY 2024A | 1H 2025A | FY 2025E |
|---|---|---|---|---|
| Order backlog (CHF m) | 268 | 295 | 306 | 310 (E) |
| Revenue (CHF m) | 239 | 282 | 156 | 315 (E) |
| YoY Growth (%) | — | +18% | +10% H1 | +12% E |
| Capacity utilization (%) | ~92 | >95 | ~100 | ~100 |
Source: Berenberg Initiation (Oct 2025) and Flash Update (Nov 2025)
Capacity Expansion
R&S’s growth and margin resilience come from strategic capacity expansion.
- Poland (Krzeczów): +40% capacity, focusing on distribution and cast-resin transformers. Faster delivery, lower costs.
- Croatia & Switzerland: Debottlenecking and automation upgrades to increase throughput and standardize components.
- Ireland (Kyte Powertech): Higher-voltage capabilities and diversification of revenue streams.
Overall, output is expected to rise >50% by 2027. Most of this expansion is already covered by confirmed orders, minimizing execution risk while protecting margins.
Margin Evolution
Margins remain strong due to a combination of product mix, operational scale, and plant efficiency.
| Metric | FY 2023A | FY 2024A | FY 2025E | FY 2026E | FY 2027E |
|---|---|---|---|---|---|
| EBITDA margin (%) | 18.6 | 20.0 | 20.8 | 21.1 | 21.2 |
| EBIT margin (%) | 16.0 | 18.4 | 19.2 | 19.8 | 20.0 |
| ROCE (%) | 49 | 55 | 58 | 60 | 60+ |
Source: Berenberg Initiation (Oct 2025) and Flash Update (Nov 2025)
High-value cast-resin units and ongoing operational improvements in Poland ensure margins remain near 20%, a rare combination of growth and profitability for mid-cap industrials.
Financial Strength
R&S has cleaned up its balance sheet, creating optionality for investors:
| Metric | FY 2024A | FY 2025E | FY 2026E | FY 2027E |
|---|---|---|---|---|
| Net Debt / EBITDA (x) | 1.3 | 0.8 | 0.4 | 0.2 |
| Equity Ratio (%) | 11 | 22 | 30 | 36 |
| FCF Yield (%) | 3.4 | 4.9 | 5.5 | 6.1 |
Source: Berenberg Initiation (Oct 2025) and Flash Update (Nov 2025)
Disciplined capex (~3–4% of sales) plus strong free cash flow sets up M&A or dividend potential post-2026.
Valuation
R&S trades at a deep discount to peers, despite top-quartile margins and strong visibility.
| Metric (2026E) | R&S Group | Peer Median | Premium / Discount |
|---|---|---|---|
| EV / EBITDA (x) | 10.9× | 17.0× | -36% |
| P / E (x) | 14.5× | 23.8× | -39% |
| FCF Yield (%) | 5.5% | 3.2% | +71% |
Source: Berenberg Initiation (Oct 2025) and Flash Update (Nov 2025)
Berenberg’s CHF 40 target comes from a DCF (70%) and 13× EV/EBITDA multiple (30%). At CHF 18.82, upside is >100%, with FCF yield >6%.
Recent Sell-Off
On 6 November 2025, R&S issued an “immaterial” guidance update. The stock fell ~30%.
We see this as a buying opportunity:
- Structural tailwinds remain intact.
- Backlog coverage protects revenue.
- Valuation discount widens the upside.
Market reaction was overblown. Fundamentals haven’t changed, making this an ideal entry point for long-term investors.
Risks
- Macroeconomics: Slow GDP growth could delay grid investments.
- Regulatory: EU energy policies or subsidies may shift, affecting renewable integration timelines.
- Supply chain & commodities: Copper, steel, and insulation material volatility can temporarily impact margins.
- Currency: CHF reporting vs. EUR costs introduces FX risk.
- Execution: Simultaneous plant expansions could cause temporary margin pressure.
These risks are manageable thanks to backlog coverage, pass-through contracts, and geographic diversification.
Investment Case Summary
R&S is a pure-play, defensive growth compounder with strong upside potential.
| Driver | Impact |
|---|---|
| European grid renewal & electrification | Multi-year growth tailwind |
| Full FY 2026 backlog | Revenue visibility & pricing power |
| 19–20% EBIT margin | Top-quartile profitability |
| Rapid deleveraging | Room for M&A/dividends |
| 35–40% discount to peers | Re-rating potential |
| High scarcity value | Few pure-play listed EU transformer peers |
Source: Berenberg Initiation (Oct 2025) and Flash Update (Nov 2025)
Conclusion
R&S Group is a rare mid-cap in Europe with pure exposure to energy transition themes. Integrated products, strong margins, backlog visibility, and a healthier balance sheet make it both defensive and high-growth.
With >100% upside to CHF 40, the recent pullback is a high-conviction entry point.
Disclosure: The author’s family office holds a long position in R&S Group Holding AG. Analysis based on publicly available information, including Berenberg research (Oct 2025 Initiation and Nov 2025 Flash Update).
The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.
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