Sunbelt Rentals (SUNB): Inflection in rates & strong 1Q27 bode well for further improvement in growth/profits; up to Buy

We upgrade Sunbelt to Buy from Neutral, with a revised 12-month price target of US$93, implying c.29% upside. Our upgrade follows the strong 1Q27 results, which saw the company deliver results ahead of consensus while raising its FY outlook. SUNB has seen negative EPS growth for the last two years, owing to weakness in local non-resi construction markets in the US which has weighed on group revenue and margin (and more than offsetting strength in mega-project activity). While rental rates remained stable, the company was unable to fully offset SG&A inflation, resulting in margin compression and EPS declines. We see the 1Q27 results marking an important inflection in two areas: (1) the company flagged rate improvement for the first time in several quarters, which we believe bodes well for the start of a margin recovery and a return to EPS growth later this year;