Investing.com — UBS downgraded Saint Gobain (EPA: ) to Neutral from Buy in a note on Thursday, citing limited upside potential following a strong performance in 2024 and rerating the stock.
“With shares trading at 12-13x P/E, we think there may still be limited re-rating potential, but modest,” UBS analysts wrote.
The downgrade comes amid concerns about rising interest rates, which could negatively impact growth expectations for end housing markets.
UBS’s operating income forecast is slightly below consensus at -1%, while EPS is forecast to be -5% below consensus.
The bank’s note highlights challenges in maintaining price/cost dynamics that have supported margins in 2024.
“2024 was characterized by a year where volumes disappointed due to the soft end of the market, but margins (forecast to increase from a record 11.0% in 2023) compensated for this,” UBS said.
Although they estimate a modest positive price/cost effect of 50 million euros in 2025, analysts warn that it will be more difficult to achieve similar gross margin gains as in recent years.
With forecast organic EBIT growth of +3% and total growth, including M&A and FX, of +7%, UBS expects total EBIT to reach EUR 5,616 million, which is 1% below consensus.
Looking ahead, Saint Gobain’s upcoming Capital Markets Day (CMD) in the second half of the year could serve as a catalyst, particularly if margin guidance is raised.
“We think a realistic target is 11-13%, bearing in mind that some categories are at very high levels by historical standards,” UBS commented. They also point to potential portfolio changes, including reports of a sale of the automotive glass business, although this has recently been ruled out.
UBS adjusted its target price to €92 per share, up slightly from €91, based on a discounted cash flow estimate using a WACC of 8% and a long-term after-tax ROIC of 10.5%.
