DB European Building Construction 2019 Outlook_watermark
.pdf
vk.com/id4464259433 December 2018
Building Materials
European Building & Construction
Figure 109: Approx. 40% of GSE loans have DTI ratios above 42%
45% |
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43% |
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38% |
40% |
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35% |
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30% |
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25% |
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20% |
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15% |
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10% |
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5% |
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0% |
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1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
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Source: Deutsche Bank, AEI
Figure 110: New Home Sales dip in periods of increasing mortgage rates in the "Danger Zone"
1,400 |
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1,200 |
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1,000 |
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800 |
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600 |
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400 |
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200 |
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0 |
Oct-85 |
Jul-87 |
Apr-89 |
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Oct-92 |
Jul-94 |
Apr-96 |
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Oct-99 |
Jul-01 |
Apr-03 |
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Oct-06 |
Jul-08 |
Apr-10 |
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Oct-13 |
Jul-15 |
Apr-17 |
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Jan-84 |
Jan-91 |
Jan-98 |
Jan-05 |
Jan-12 |
Jan-19 |
Source: Deutsche Bank, US Census, Factset
Figure 111: Change (bps) in US Borrowing Rates - 30Y Mortgage vs. 10Y US Treasury
rates |
10 |
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DANGER |
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8 |
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in |
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6 |
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changemonthly |
(bps) |
4 |
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2 |
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0 |
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-2 |
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-4 |
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Annual |
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-6 |
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-8 |
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-10 |
Oct-11 |
Jul-12 |
Apr-13 |
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Oct-14 |
Jul-15 |
Apr-16 |
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Oct-17 |
Jul-18 |
Apr-19 |
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Jan-11 |
Jan-14 |
Jan-17 |
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10Y UST Yield |
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30Y Mortgage Rate |
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Source: Deutsche Bank, Bloomberg Finance LP. Note: DB ests for 10Y Yields and Policy rates
Figure 112: US building mats 12m forward P/E dipping during the "Danger Zone"
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35 |
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30 |
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25 |
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20 |
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10 |
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5 |
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0 |
Dec-97 |
Nov-98 |
Oct-99 |
Sep-00 |
Aug-01 |
Jul-02 |
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May-04 |
Apr-05 |
Mar-06 |
Feb-07 |
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Dec-08 |
Nov-09 |
Oct-10 |
Sep-11 |
Aug-12 |
Jul-13 |
Jun-14 |
May-15 |
Apr-16 |
Mar-17 |
Feb-18 |
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Jan-97 |
Jun-03 |
Jan-08 |
Jan-19 |
Source: Deutsche Bank, Factset. Notes: VMC+MLM proxy for US building mats sector
Forecasts and ratios |
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Year End Dec 31 |
2016A |
2017A |
2018E |
2019E |
2020E |
Revenue (EURm) |
27,104 |
25,220 |
26,369 |
28,127 |
30,051 |
EBITDA (EURm) |
3,130 |
3,146 |
3,358 |
3,761 |
4,203 |
EBITA (EURm) |
2,027 |
2,095 |
2,258 |
2,580 |
2,948 |
PBT DB (EURm) |
1,691 |
1,802 |
1,814 |
2,156 |
2,539 |
PBT stated (EURm) |
1,691 |
1,802 |
1,814 |
2,156 |
2,539 |
DB EPS (EUR) |
1.49 |
2.14 |
1.73 |
2.10 |
2.48 |
OLD DB EPS (EUR) |
1.49 |
2.14 |
1.79 |
2.19 |
2.51 |
% Change |
0.0% |
0.0% |
-3.5% |
-4.4% |
-1.4% |
DB EPS growth (%) |
49.2 |
43.4 |
-19.3 |
21.3 |
18.2 |
P/E (DB EPS) (x) |
18.2 |
14.7 |
14.1 |
11.6 |
9.8 |
DB EV/ DB EBITDA (x) |
9.1 |
10.3 |
8.1 |
6.9 |
5.8 |
EV/EBITA (x) |
14.0 |
15.5 |
12.0 |
10.1 |
8.3 |
DPS (EUR) |
0.65 |
0.68 |
0.70 |
0.78 |
0.92 |
Yield (%) |
2.4 |
2.2 |
2.9 |
3.2 |
3.8 |
Source: Deutsche Bank estimates, company data |
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Deutsche Bank AG/London |
Page 51 |
vk.com/id446425943
3 December 2018
Building Materials
European Building & Construction
Model updated: 29 November 2018
Running the Numbers
Europe
Ireland
Building Materials
CRH
Reuters: CRH.I Bloomberg: CRH ID
Hold
Price (29 Nov 18) |
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€ 24.31 |
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Target price |
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€ 28.00 |
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52-week Range |
€ 23.48 – 32.62 |
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Market Cap |
€ |
19,771m |
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US$ |
22,309m |
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Company Profile
CRH is based in Ireland and has operations in 35 countries. Geographically CRH is mainly active in Europe and the US. CRH tried to develop a balanced portfolio across regions, products and construction sectors. Besides organic growth CRH has been an active acquirer of mid-sized companies and is from time to time willing to do larger transactions. CRH operates the three main segments of heavy building materials, building products and building distribution.
1yr Price Performance
34 |
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32 |
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30 |
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28 |
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26 |
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24 |
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22 |
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20 |
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Nov-17 |
Feb-18 |
May-18 |
Aug-18 |
CRH.I |
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EURO STOXX PRICE (Rebased) |
Margin Trends
16 |
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14 |
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12 |
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10 |
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8 |
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6 |
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4 |
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2 |
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0 |
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15 |
16 |
17 |
18E |
19E |
20E |
EBITDA Margin |
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EBIT Margin |
Growth & Profitability
30 |
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14 |
25 |
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12 |
20 |
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10 |
15 |
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8 |
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10 |
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6 |
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5 |
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4 |
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0 |
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-5 |
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2 |
10 |
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0 |
15 |
16 |
17 |
18E |
19E |
20E |
Sales growth (LHS) |
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ROE (RHS) |
Solvency |
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60 |
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8 |
50 |
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6 |
40 |
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30 |
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4 |
20 |
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2 |
10 |
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0 |
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0 |
15 |
16 |
17 |
18E |
19E |
20E |
Net debt/equity (LHS) Net interest cover (RHS)
Xavier Marchand
+44(207)545-1400 xavier.marchand@db.com
Fiscal year end 31-Dec |
2015 |
2016 |
2017 |
2018E |
2019E |
2020E |
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Financial Summary |
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DB EPS (€) |
1.00 |
1.49 |
2.14 |
1.73 |
2.10 |
2.48 |
Reported EPS (€) |
1.00 |
1.49 |
2.14 |
1.73 |
2.10 |
2.48 |
DPS (€) |
0.63 |
0.65 |
0.68 |
0.70 |
0.78 |
0.92 |
BVPS (€) |
15.74 |
16.79 |
17.34 |
19.33 |
22.27 |
25.66 |
Weighted average shares (m) |
827 |
828 |
836 |
813 |
795 |
790 |
Average market cap (€m) |
20,209 |
22,489 |
26,283 |
19,771 |
19,321 |
19,204 |
Enterprise value (€m) |
27,344 |
28,381 |
32,418 |
27,109 |
25,643 |
23,934 |
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Valuation Metrics |
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P/E (DB) (x) |
24.4 |
18.2 |
14.7 |
14.1 |
11.6 |
9.8 |
P/E (Reported) (x) |
24.4 |
18.2 |
14.7 |
14.1 |
11.6 |
9.8 |
P/BV (x) |
1.67 |
1.96 |
1.73 |
1.26 |
1.09 |
0.95 |
FCF Yield (%) |
5.7 |
6.8 |
4.4 |
6.6 |
8.8 |
10.7 |
Dividend Yield (%) |
2.6 |
2.4 |
2.2 |
2.9 |
3.2 |
3.8 |
EV/Sales (x) |
1.16 |
1.05 |
1.29 |
1.03 |
0.91 |
0.80 |
EV/EBITDA (x) |
12.3 |
9.1 |
10.3 |
8.1 |
6.8 |
5.7 |
EV/EBIT (x) |
19.8 |
14.0 |
15.5 |
12.0 |
9.9 |
8.1 |
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Income Statement (€m) |
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Sales revenue |
23,635 |
27,104 |
25,220 |
26,369 |
28,127 |
30,051 |
Gross profit |
2,219 |
3,130 |
3,146 |
3,358 |
3,761 |
4,203 |
EBITDA |
2,219 |
3,130 |
3,146 |
3,358 |
3,761 |
4,203 |
Depreciation |
784 |
1,103 |
1,051 |
1,100 |
1,181 |
1,256 |
Amortisation |
55 |
0 |
0 |
0 |
0 |
0 |
EBIT |
1,380 |
2,027 |
2,095 |
2,258 |
2,580 |
2,948 |
Net interest income(expense) |
-389 |
-391 |
-349 |
-444 |
-424 |
-409 |
Associates/affiliates |
44 |
42 |
65 |
66 |
68 |
69 |
Exceptionals/extraordinaries |
101 |
55 |
56 |
0 |
0 |
0 |
Other pre-tax income/(expense) |
0 |
0 |
0 |
0 |
0 |
0 |
Profit before tax |
1,092 |
1,691 |
1,802 |
1,814 |
2,156 |
2,539 |
Income tax expense |
304 |
471 |
55 |
451 |
534 |
626 |
Minorities |
5 |
27 |
24 |
24 |
25 |
27 |
Other post-tax income/(expense) |
0 |
0 |
0 |
0 |
0 |
0 |
Net profit |
827 |
1,235 |
1,788 |
1,405 |
1,665 |
1,956 |
DB adjustments (including dilution) |
0 |
0 |
0 |
0 |
0 |
0 |
DB Net profit |
827 |
1,235 |
1,788 |
1,405 |
1,665 |
1,956 |
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Cash Flow (€m) |
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Cash flow from operations |
2,029 |
2,380 |
2,205 |
2,457 |
2,845 |
3,208 |
Net Capex |
-882 |
-853 |
-1,044 |
-1,150 |
-1,150 |
-1,150 |
Free cash flow |
1,147 |
1,527 |
1,161 |
1,307 |
1,695 |
2,058 |
Equity raised/(bought back) |
1,590 |
223 |
122 |
-740 |
-260 |
0 |
Dividends paid |
-521 |
-523 |
-551 |
-568 |
-569 |
-616 |
Net inc/(dec) in borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
Other investing/financing cash flows |
-6,485 |
94 |
-1,231 |
-1,200 |
150 |
150 |
Net cash flow |
-4,269 |
1,321 |
-499 |
-1,201 |
1,016 |
1,592 |
Change in working capital |
585 |
56 |
-209 |
-150 |
-100 |
-100 |
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Balance Sheet (€m) |
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Cash and other liquid assets |
2,518 |
2,449 |
2,115 |
2,115 |
2,115 |
2,115 |
Tangible fixed assets |
13,062 |
12,690 |
13,094 |
14,144 |
13,962 |
13,707 |
Goodwill/intangible assets |
7,820 |
7,761 |
7,214 |
7,214 |
7,214 |
7,214 |
Associates/investments |
1,454 |
1,401 |
1,337 |
2,746 |
3,839 |
5,085 |
Other assets |
7,153 |
7,293 |
7,873 |
7,993 |
8,073 |
8,153 |
Total assets |
32,007 |
31,594 |
31,633 |
34,212 |
35,203 |
36,274 |
Interest bearing debt |
9,221 |
7,790 |
7,976 |
9,177 |
8,162 |
6,569 |
Other liabilities |
9,242 |
9,361 |
8,680 |
8,710 |
8,730 |
8,750 |
Total liabilities |
18,463 |
17,151 |
16,656 |
17,887 |
16,892 |
15,319 |
Shareholders' equity |
13,015 |
13,895 |
14,491 |
15,724 |
17,699 |
20,270 |
Minorities |
529 |
548 |
486 |
500 |
513 |
526 |
Total shareholders' equity |
13,544 |
14,443 |
14,977 |
16,224 |
18,212 |
20,796 |
Net debt |
6,703 |
5,341 |
5,861 |
7,062 |
6,047 |
4,454 |
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Key Company Metrics |
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Sales growth (%) |
25.0 |
14.7 |
-7.0 |
4.6 |
6.7 |
6.8 |
DB EPS growth (%) |
26.9 |
49.2 |
43.4 |
-19.3 |
21.3 |
18.2 |
EBITDA Margin (%) |
9.4 |
11.5 |
12.5 |
12.7 |
13.4 |
14.0 |
EBIT Margin (%) |
5.8 |
7.5 |
8.3 |
8.6 |
9.2 |
9.8 |
Payout ratio (%) |
62.5 |
43.6 |
31.8 |
40.5 |
37.0 |
37.0 |
ROE (%) |
7.1 |
9.2 |
12.6 |
9.3 |
10.0 |
10.3 |
Capex/sales (%) |
3.7 |
3.1 |
4.1 |
4.4 |
4.1 |
3.8 |
Capex/depreciation (x) |
1.1 |
0.8 |
1.0 |
1.0 |
1.0 |
0.9 |
Net debt/equity (%) |
49.5 |
37.0 |
39.1 |
43.5 |
33.2 |
21.4 |
Net interest cover (x) |
3.5 |
5.2 |
6.0 |
5.1 |
6.1 |
7.2 |
Source: Company data, Deutsche Bank estimates
Page 52 |
Deutsche Bank AG/London |
vk.com/id4464259433 December 2018
Building Materials
European Building & Construction
Rating |
|
Company |
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|
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Hold |
|
Geberit |
|
Research Analyst |
|
||
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|
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Xavier Marchand |
|
|
Europe |
|
|
|
+44-20-754-51400 |
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||
|
|
|
|
xavier.marchand@db.com |
|
||
Switzerland |
|
|
|
|
|
|
|
Building & Construction |
|
|
|
|
Price at 28 Nov 2018 (CHF) |
385.10 |
|
|
Reuters |
Bloomberg |
|
|
|
|
|
|
|
Price Target (CHF) |
430.00 |
||||
Building Materials |
|
|
|
|
|||
|
GEBN.S |
GEBN SE |
|
|
|
|
|
|
|
52-week range (CHF) |
466.00 - 376.80 |
||||
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|||||
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Geberit (HOLD)
With this note, we transfer primary coverage of Geberit from Priyal Mulji to Xavier Marchand with immediate effect.
All in the price
Geberit has a proven track record of market outperformance. In addition, in a context of increasing macro worries, we like its 70% exposure to the more latecycle and resilient renovation segment. After a disappointing Q3, we see however risks for continued lackluster organic sales growth as the next two sets of results will have tough comps (resp. +5.3% and +4.7% organic sales growth in Q4 17 & Q1 18). In addition we see limited scope for margin surprise as no incremental price increase should be implemented before April 2019, the benefits of France site closure on fixed costs should fade from Q4 18 and costs inflation should remain high for the majority of H1 19. Trading at 16.8x 2019E EV/EBITDA, Geberit remains the most expensive stock under our coverage, which we believe fairly reflects the quality fundamentals. HOLD.
Geberit at a glance
Figure 113:2018E Sales by geography
|
Far East & Pacific |
ME & Africa |
|
Iberian |
|
3% |
3% |
|
|
|
|
Peninsula |
Americas |
|
|
1% |
3% |
|
|
|
|
|
Germany |
C & E Europe |
|
|
31% |
|
|
|
|
10% |
|
|
|
Nordic |
|
|
|
10% |
|
|
|
France |
|
Switzerland |
|
|
6% |
|
9% |
Benelux |
|
|
Italy |
8% |
UK & Ireland |
Austria |
7% |
|
|
|
|
4% |
5% |
|
Key changes |
|
|
TP |
443.00 to ↓ |
-2.9% |
|
430.00 |
|
Source: Deutsche Bank
Price/price relative
500 |
|
|
400 |
|
|
300 |
|
|
200 |
|
|
2016 |
2017 |
2018 |
|
|
Geberit |
|
SPI Swiss Performance IX (Rebased) |
||
|
|
|
||||
Performance |
1m |
3m |
12m |
|||
(%) |
|
|
|
|
|
|
Absolute |
-8.4 |
-12.8 |
-10.2 |
|||
SPI Swiss |
1.9 |
-4.0 |
-2.6 |
|||
Performance |
|
|
|
|||
IX |
|
|
|
|||
Source: Deutsche Bank |
|
|
|
|||
|
|
|
||||
Key indicators (FY1) |
|
|
||||
ROE (%) |
|
|
33.1 |
|||
Net debt/equity (%) |
|
28.1 |
||||
Book value/share (CHF) |
|
49.6 |
||||
Price/book (x) |
|
|
7.8 |
|||
Net interest cover (x) |
|
69.0 |
||||
EBIT margin (%) |
|
|
23.2 |
|||
Source: Deutsche Bank |
|
|
|
|||
|
|
|
||||
Stock & option liquidity data |
|
|
||||
Market cap (CHF)(m) |
|
14,027.7 |
||||
Shares outstanding (m) |
|
37 |
||||
Free float (%) |
|
|
– |
|||
Option volume (und. shrs., 1M avg.) |
– |
|||||
|
|
|
|
|||
Source: Deutsche Bank |
|
|
|
|||
Source:Deutsche Bank, Company data
Deutsche Bank AG/London |
Page 53 |
vk.com/id446425943
3 December 2018
Building Materials
European Building & Construction
Forecasts and ratios |
|
|
|
|
|
Year End Dec 31 |
2016A |
2017A |
2018E |
2019E |
2020E |
Revenue (CHFm) |
2,809 |
2,908 |
3,067 |
3,111 |
3,189 |
EBITDA (CHFm) |
785 |
772 |
864 |
885 |
914 |
EBITA (CHFm) |
640 |
622 |
711 |
753 |
779 |
PBT DB (CHFm) |
677 |
697 |
736 |
742 |
769 |
PBT stated (CHFm) |
631 |
612 |
701 |
742 |
769 |
DB EPS (CHF) |
15.84 |
16.39 |
17.40 |
17.17 |
17.95 |
OLD DB EPS (CHF) |
15.84 |
16.39 |
17.65 |
17.82 |
18.56 |
% Change |
0.0% |
0.0% |
-1.4% |
-3.6% |
-3.3% |
DB EPS growth (%) |
20.0 |
3.5 |
6.2 |
-1.3 |
4.5 |
P/E (DB EPS) (x) |
24.0 |
27.0 |
22.1 |
22.4 |
21.5 |
DB EV/ DB EBITDA (x) |
18.5 |
21.7 |
16.8 |
16.4 |
15.8 |
EV/EBITA (x) |
22.6 |
27.0 |
20.4 |
19.3 |
18.6 |
DPS (CHF) |
10.00 |
10.40 |
11.39 |
11.24 |
11.69 |
Yield (%) |
2.6 |
2.3 |
3.0 |
2.9 |
3.0 |
Source: Deutsche Bank estimates, company data |
|
|
|
|
|
Page 54 |
Deutsche Bank AG/London |
vk.com/id4464259433 December 2018
Building Materials
European Building & Construction
Model updated: 29 November 2018
Running the Numbers
Europe
Switzerland
Building Materials
Geberit
|
Reuters: GEBN.S |
Bloomberg: GEBN SE |
|
|
|
|
Hold |
|
|
Price (29 Nov 18) |
CHF 385.10 |
|
||
|
|
|
|
Target price |
CHF 430.00 |
|
|
|
|
52-week Range |
CHF 376.80 – 466.00 |
|
|
|
|
Market Cap |
CHF 14,028m |
|
|
US$ 14,032m |
|
|
|
Company Profile
Geberit's traditional focus has been production of behind-the- wall bathroom products such as sanitary systems (e.g. hidden all-in-one systems to enable functioning of toilets, basins, urinals) and piping systems (e.g. for drainage). Following the acquisition of Sanitec (a bathroom ceramics producer) in Feb 2015, Geberit also offers front-of-wall sanitary items (e.g. toilets, washbasins), so it now sells a full range of bathroom products - a key differentiator from most peers, which have a more focused product range.
1yr Price Performance
500 |
|
|
|
450 |
|
|
|
400 |
|
|
|
350 |
|
|
|
300 |
|
|
|
Nov-17 |
Feb-18 |
May-18 |
Aug-18 |
|
|
GEBN.S |
SPI (Rebased) |
Margin Trends
35 |
|
|
|
|
|
30 |
|
|
|
|
|
25 |
|
|
|
|
|
20 |
|
|
|
|
|
15 |
|
|
|
|
|
10 |
|
|
|
|
|
5 |
|
|
|
|
|
0 |
|
|
|
|
|
15 |
16 |
17 |
18E |
19E |
20E |
EBITDA Margin |
|
EBIT Margin |
Growth & Profitability
30 |
|
|
|
|
40 |
25 |
|
|
|
|
35 |
|
|
|
|
30 |
|
20 |
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
15 |
|
|
|
|
20 |
10 |
|
|
|
|
15 |
|
|
|
|
10 |
|
5 |
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
0 |
|
|
|
|
0 |
15 |
16 |
17 |
18E |
19E |
20E |
Sales growth (LHS) |
|
ROE (RHS) |
Solvency |
|
|
|
|
|
50 |
|
|
|
|
80 |
40 |
|
|
|
|
60 |
|
|
|
|
|
|
30 |
|
|
|
|
40 |
20 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
20 |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
15 |
16 |
17 |
18E |
19E |
20E |
Net debt/equity (LHS) Net interest cover (RHS)
Xavier Marchand
+44(207)545-1400 xavier.marchand@db.com
Fiscal year end 31-Dec |
2015 |
2016 |
2017 |
2018E |
2019E |
2020E |
|
|
|
|
|
|
|
Financial Summary |
|
|
|
|
|
|
DB EPS (CHF) |
13.20 |
15.84 |
16.39 |
17.40 |
17.17 |
17.95 |
Reported EPS (CHF) |
11.31 |
14.85 |
14.31 |
16.43 |
17.17 |
17.95 |
DPS (CHF) |
8.40 |
10.00 |
10.40 |
11.39 |
11.24 |
11.69 |
BVPS (CHF) |
39.76 |
44.39 |
49.95 |
49.61 |
51.74 |
54.51 |
Weighted average shares (m) |
37.3 |
36.8 |
36.8 |
36.4 |
36.1 |
35.9 |
Average market cap (CHFm) |
11,911 |
14,027 |
16,284 |
14,028 |
13,890 |
13,821 |
Enterprise value (CHFm) |
12,591 |
14,488 |
16,767 |
14,536 |
14,369 |
14,243 |
|
|
|
|
|
|
|
Valuation Metrics |
|
|
|
|
|
|
P/E (DB) (x) |
24.2 |
24.0 |
27.0 |
22.1 |
22.4 |
21.5 |
P/E (Reported) (x) |
28.2 |
25.6 |
30.9 |
23.4 |
22.4 |
21.5 |
P/BV (x) |
8.35 |
9.20 |
8.59 |
7.76 |
7.44 |
7.07 |
FCF Yield (%) |
4.6 |
5.1 |
3.8 |
5.1 |
5.2 |
5.4 |
Dividend Yield (%) |
2.6 |
2.6 |
2.3 |
3.0 |
2.9 |
3.0 |
EV/Sales (x) |
4.85 |
5.16 |
5.77 |
4.74 |
4.62 |
4.47 |
EV/EBITDA (x) |
19.9 |
18.5 |
21.7 |
16.8 |
16.2 |
15.6 |
EV/EBIT (x) |
25.3 |
22.6 |
27.0 |
20.4 |
19.1 |
18.3 |
|
|
|
|
|
|
|
Income Statement (CHFm) |
|
|
|
|
|
|
Sales revenue |
2,594 |
2,809 |
2,908 |
3,067 |
3,111 |
3,189 |
Gross profit |
1,809 |
2,034 |
2,079 |
2,199 |
2,237 |
2,299 |
EBITDA |
632 |
785 |
772 |
864 |
885 |
914 |
Depreciation |
96 |
102 |
106 |
109 |
112 |
116 |
Amortisation |
38 |
43 |
45 |
45 |
20 |
20 |
EBIT |
498 |
640 |
622 |
711 |
753 |
779 |
Net interest income(expense) |
-24 |
-9 |
-9 |
-10 |
-10 |
-10 |
Associates/affiliates |
0 |
0 |
0 |
0 |
0 |
0 |
Exceptionals/extraordinaries |
0 |
0 |
0 |
0 |
0 |
0 |
Other pre-tax income/(expense) |
0 |
0 |
0 |
0 |
0 |
0 |
Profit before tax |
475 |
631 |
612 |
701 |
742 |
769 |
Income tax expense |
52 |
83 |
85 |
98 |
119 |
123 |
Minorities |
0 |
0 |
0 |
0 |
0 |
0 |
Other post-tax income/(expense) |
0 |
0 |
0 |
0 |
0 |
0 |
Net profit |
422 |
548 |
527 |
603 |
624 |
646 |
DB adjustments (including dilution) |
71 |
36 |
77 |
36 |
0 |
0 |
DB Net profit |
493 |
585 |
604 |
638 |
624 |
646 |
|
|
|
|
|
|
|
Cash Flow (CHFm) |
|
|
|
|
|
|
Cash flow from operations |
695 |
814 |
770 |
885 |
879 |
905 |
Net Capex |
-141 |
-100 |
-146 |
-170 |
-156 |
-159 |
Free cash flow |
554 |
714 |
624 |
715 |
724 |
745 |
Equity raised/(bought back) |
0 |
0 |
0 |
0 |
0 |
0 |
Dividends paid |
-311 |
-309 |
-368 |
-383 |
-415 |
-405 |
Net inc/(dec) in borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
Other investing/financing cash flows |
-1,490 |
-179 |
-229 |
-358 |
-279 |
-283 |
Net cash flow |
-1,247 |
225 |
27 |
-26 |
30 |
57 |
Change in working capital |
-36 |
-33 |
-51 |
21 |
-5 |
-9 |
|
|
|
|
|
|
|
Balance Sheet (CHFm) |
|
|
|
|
|
|
Cash and other liquid assets |
460 |
510 |
413 |
400 |
415 |
443 |
Tangible fixed assets |
715 |
727 |
813 |
874 |
917 |
961 |
Goodwill/intangible assets |
1,757 |
1,681 |
1,749 |
1,704 |
1,685 |
1,665 |
Associates/investments |
0 |
0 |
0 |
0 |
0 |
0 |
Other assets |
622 |
684 |
768 |
756 |
759 |
765 |
Total assets |
3,554 |
3,601 |
3,743 |
3,734 |
3,776 |
3,834 |
Interest bearing debt |
1,139 |
971 |
895 |
908 |
893 |
865 |
Other liabilities |
932 |
995 |
1,010 |
1,019 |
1,017 |
1,013 |
Total liabilities |
2,072 |
1,966 |
1,906 |
1,927 |
1,910 |
1,878 |
Shareholders' equity |
1,482 |
1,635 |
1,837 |
1,807 |
1,866 |
1,956 |
Minorities |
0 |
0 |
0 |
0 |
0 |
0 |
Total shareholders' equity |
1,482 |
1,635 |
1,837 |
1,807 |
1,866 |
1,956 |
Net debt |
680 |
461 |
483 |
508 |
478 |
422 |
|
|
|
|
|
|
|
Key Company Metrics |
|
|
|
|
|
|
Sales growth (%) |
24.2 |
8.3 |
3.5 |
5.4 |
1.5 |
2.5 |
DB EPS growth (%) |
-0.4 |
20.0 |
3.5 |
6.2 |
-1.3 |
4.5 |
EBITDA Margin (%) |
24.4 |
28.0 |
26.5 |
28.2 |
28.4 |
28.7 |
EBIT Margin (%) |
19.2 |
22.8 |
21.4 |
23.2 |
24.2 |
24.4 |
Payout ratio (%) |
74.1 |
67.2 |
72.5 |
68.9 |
65.0 |
65.0 |
ROE (%) |
26.4 |
35.2 |
30.4 |
33.1 |
34.0 |
33.8 |
Capex/sales (%) |
5.7 |
5.0 |
5.5 |
5.5 |
5.0 |
5.0 |
Capex/depreciation (x) |
1.1 |
1.0 |
1.1 |
1.1 |
1.2 |
1.2 |
Net debt/equity (%) |
45.9 |
28.2 |
26.3 |
28.1 |
25.6 |
21.6 |
Net interest cover (x) |
21.2 |
68.8 |
66.1 |
69.0 |
73.1 |
75.6 |
Source: Company data, Deutsche Bank estimates
Deutsche Bank AG/London |
Page 55 |
vk.com/id446425943
3 December 2018
Building Materials
European Building & Construction
Rating |
|
Company |
|
|
Research Analyst |
|
|
|
|
|
|
||||
Hold |
|
HeidelbergCement |
|
|
|||
|
|
|
|
|
Xavier Marchand |
|
|
|
|
|
|
+44-20-754-51400 |
|
||
Europe |
|
|
|
|
xavier.marchand@db.com |
|
|
Germany |
|
|
|
|
|
|
|
Building & Construction |
|
|
|
|
Price at 28 Nov 2018 (EUR) |
59.40 |
|
|
Reuters |
Bloomberg |
|
|
|
|
|
|
|
Price Target (EUR) |
72.00 |
||||
Building Materials |
|
|
|
|
|||
|
HEIG.DE |
HEI GY |
|
|
|
|
|
|
|
52-week range (EUR) |
95.50 - 55.38 |
||||
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HeidelbergCement (Downgrade to HOLD)
Lack of short-term catalysts
While we have barely changed our EBITDA forecasts for 2019, we downgrade Heidelberg to Hold as in our view the stock lacks short-term catalysts. After recent profit warning and a probable 7-10% EBITDA miss vs. initial guidance in 2018, 2019E guidance will be taken very cautiously. In addition, our detailed US weather analysis on Heidelberg footprint suggests Q1 19 comps are not as easy as it seems and finally we believe evidence of improved price vs. cost should not be seen before Q3 19. In absence of short-term catalysts and in spite of attractive valuation (c10% FCF yield in 2019E, the highest among large-cap European peers) we believe the stock will be vulnerable to any negative macro news. Downgrade to HOLD.
HeidelbergCement at a glance
Figure 114: 2018E Sales and EBITDA by geography
|
Group |
Africa Med |
W S Europe |
|
|
4% |
|||
Africa Med |
12% |
|||
17% |
||||
|
||||
10% |
W S |
|
||
|
|
|||
|
Europe |
|
|
|
|
28% |
Asia |
|
|
Asia |
|
Pacific |
N E |
|
|
20% |
|||
Pacific |
|
Europe |
||
|
|
|||
18% |
|
|
18% |
|
North |
N E |
|
|
|
Europe |
|
North America |
||
America |
|
|||
16% |
|
33% |
||
24% |
|
|||
|
|
|
Source: Deutsche Bank, Company data
Key changes |
|
|
TP |
75.00 to 72.00 ↓ |
-4.0% |
Rating |
Buy to Hold ↓ |
|
Source: Deutsche Bank |
|
|
Price/price relative
100 |
|
|
75 |
|
|
50 |
|
|
2016 |
2017 |
2018 |
|
|
HeidelbergCement |
|
DJ (.STOXXE) (Rebased) |
||
|
|
|
||||
Performance |
1m |
|
3m |
12m |
||
(%) |
|
|
|
|
|
|
Absolute |
3.4 |
-15.9 |
-33.7 |
|||
DJ |
0.9 |
-9.3 |
-10.6 |
|||
(.STOXXE) |
|
|
|
|
||
Source: Deutsche Bank |
|
|
|
|
||
|
|
|
|
|
||
Key indicators (FY1) |
|
|
|
|
||
ROE (%) |
|
|
|
8.3 |
||
Net debt/equity (%) |
|
|
|
50.3 |
||
Book value/share (EUR) |
|
|
76.6 |
|||
Price/book (x) |
|
|
|
0.8 |
||
Net interest cover (x) |
|
|
5.6 |
|||
Source: Deutsche Bank |
|
|
|
|
||
|
|
|
|
|
||
Key indicators (FY1) |
|
|
|
|
||
EBIT margin (%) |
|
|
|
11.1 |
||
Source: Deutsche Bank |
|
|
|
|
||
|
|
|||||
Stock & option liquidity data |
|
|||||
Market cap (EUR)(m) |
|
|
11,785.9 |
|||
Shares outstanding (m) |
|
|
198 |
|||
Free float (%) |
|
|
|
– |
||
Option volume (und. shrs., 1M avg.) |
63,629 |
|||||
Source: Deutsche Bank |
|
|
|
|
||
Page 56 |
Deutsche Bank AG/London |
vk.com/id4464259433 December 2018
Building Materials
European Building & Construction
No price vs. cost improvement before Q3 19E
While organic growth has surprised positively (c.4% lfl cement volumes growth in 9m 18), Heidelberg has been penalized by the high energy cost inflation seen in 2018 and its inability to compensate it through su cient price increase - this has led to c200bps of cement EBITDA margin contraction in 9m 18. With high energy cost inflation in sight until at least Q2 19 (see our analysis on Figure 117) and the timing of price increase in DM not before April 19 with full impact only in Q3, we see risks that price vs. cost should remain negative until Q3 19.
Figure 115: Heidelberg has been unable to have lfl EBITDA growth since the reinflation of energy costs in H2 16
30% |
|
|
|
|
|
|
|
|
|
|
|
|
20% |
|
|
|
|
|
|
|
|
|
|
|
|
10% |
|
|
|
|
|
|
|
|
|
|
|
|
0% |
|
|
|
|
|
|
|
|
|
|
|
|
-10% |
|
|
|
|
|
|
|
|
|
|
|
|
-20% |
|
|
|
|
|
|
|
|
|
|
|
|
-30% |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018E |
|
|
lfl EBITDA growth |
|
|
|
lfl Sales growth |
|
|
|
Source: Deutsche Bank estimates, Company data
Figure 116: Heidelberg price vs. cost should be strongly negative in H2 18E
4% |
|
|
|
3% |
|
|
|
2% |
|
|
|
1% |
|
|
|
0% |
|
|
|
-1% |
|
|
|
-2% |
|
|
|
-3% |
|
|
H1 18 |
H2 16 |
H1 17 |
H2 17 |
|
Buzzi |
Cemex |
CRH |
Heidelberg |
18EH2
LafargeHolcim
Source: Deutsche Bank estimates, Company data
Figure 117: Energy costs inflation should remain high a headwind in H1 19E
130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14% |
125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12% |
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
8% |
110 |
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
6% |
|
105 |
|
|
|
|
|
|
|
|
|
Energy cost inflation |
|||||
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|
|
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|
||||||
100 |
|
|
|
|
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|
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|
should remain high |
4% |
||||
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|
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|
||||||
95 |
|
|
|
|
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|
|
|
at least until Q2 19 |
2% |
||||
90 |
|
|
|
|
|
|
|
|
|
|
|
Q1 19E |
|
|
0% |
Q1 16 |
Q2 16 |
Q3 16 |
Q4 16 |
Q1 17 |
Q2 17 |
Q3 17 |
Q4 17 |
Q1 18 |
Q2 18 |
Q3 18 |
Q4 18E |
Q2 19E |
Q3 19E |
Q4 19E |
|
|
YoY increase (rhs,%) |
|
|
|
Energy cost Index HEI (lhs) |
|
|
|
Source: Deutsche Bank, Bloomberg Finance LP
Q1 19 comps not as easy as it seems
With Q1 18 EBITDA down 26% on a lfl basis notably due to a weak performance in North America, investors may believe Heidelberg will benefit from easy comps in Q1 19. Our analysis on US weather confirms that Q1 18 was indeed tougher vs. Q1 17 (21 freezing days of freeze on Heidelberg US footprint in Q1 18 vs. 17 in Q1 17). However our analysis also shows that it was more due to exceptionally mild weather in Q1 17 rather than very harsh Q1 18 weather. We see thus risks for no significant volume upside in Q1 19E in the US.
Deutsche Bank AG/London |
Page 57 |
vk.com/id446425943
3 December 2018
Building Materials
European Building & Construction
Figure 118: # days with temperature < 0 degrees on
Heidelberg US footprint
35 |
|
30 |
30y average= 21 days |
|
|
25 |
21.1 |
|
|
20 |
|
15 |
16.8 |
|
|
10 |
|
1989 |
1990 |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
Source: Deutsche Bank, Bloomberg Finance LP
Figure 119: Weather impact on cement demand in Q1 for Heidelberg US
|
Q1 11 |
Q1 12 |
Q1 13 |
Q1 14 |
Q1 15 |
Q1 16 |
Q1 17 |
Q1 18 |
# of freezing days |
26 |
12 |
21 |
31 |
30 |
19 |
17 |
21 |
Q1 YoY |
|
20.0% |
-0.6% |
-1.5% |
4.0% |
15.5% |
2.8% |
-5.9% |
FY YoY |
|
4.5% |
3.3% |
5.1% |
3.7% |
2.5% |
1.1% |
0.5% |
Q1 YoY % adj |
|
15.5% |
-3.9% |
-6.6% |
0.3% |
13.1% |
1.7% |
-6.4% |
Weather impact |
|
16.0% |
-10.8% |
-10.3% |
1.3% |
11.5% |
2.7% |
-4.8% |
Source: Deutsche Bank estimates, Company data, Bloomberg Finance LP
More bearish view on the macro in North America and Western Europe
We also take in this report a more cautious stance on North America and Western Europe where we see risks mounting on the new residential segment. With 31% of its sales coming from Developed Markets new build segments and more than 80% of EBITDA improvement in 2019 coming from underlying DM improvement, we see risks on Heidelberg if macro indicators continue to weaken.
Forecasts and ratios |
|
|
|
|
|
Year End Dec 31 |
2016A |
2017A |
2018E |
2019E |
2020E |
Revenue (EURm) |
15,166 |
17,267 |
17,592 |
18,685 |
19,586 |
EBITDA (EURm) |
2,939 |
3,523 |
3,049 |
3,218 |
3,433 |
EBITA (EURm) |
1,984 |
2,414 |
1,954 |
2,123 |
2,338 |
PBT DB (EURm) |
1,204 |
1,941 |
1,754 |
1,858 |
2,118 |
PBT stated (EURm) |
1,204 |
1,941 |
1,754 |
1,858 |
2,118 |
DB EPS (EUR) |
3.66 |
6.27 |
6.20 |
6.56 |
7.51 |
OLD DB EPS (EUR) |
3.66 |
6.27 |
6.16 |
6.90 |
7.59 |
% Change |
0.0% |
0.0% |
0.7% |
-4.9% |
-1.1% |
DB EPS growth (%) |
-96.0 |
71.4 |
-1.1 |
5.7 |
14.6 |
P/E (DB EPS) (x) |
21.0 |
13.8 |
9.6 |
9.1 |
7.9 |
DB EV/ DB EBITDA (x) |
8.2 |
7.4 |
7.3 |
6.6 |
5.9 |
EV/EBITA (x) |
12.2 |
10.8 |
11.4 |
10.0 |
8.7 |
DPS (EUR) |
1.60 |
1.90 |
2.17 |
2.62 |
3.00 |
Yield (%) |
2.1 |
2.2 |
3.7 |
4.4 |
5.1 |
Source: Deutsche Bank estimates, company data |
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|
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|
|
Page 58 |
Deutsche Bank AG/London |
vk.com/id4464259433 December 2018
Building Materials
European Building & Construction
Model updated: 29 November 2018
Running the Numbers
Europe
Germany
Building Materials
HeidelbergCement
Reuters: HEIG.DE Bloomberg: HEI GY
Hold
Price (29 Nov 18) |
|
€ 59.40 |
|
|
|
Target price |
|
€ 72.00 |
|
|
|
52-week Range |
€ 55.38 – 95.50 |
|
|
|
|
Market Cap |
€ |
11,786m |
|
US$ |
13,299m |
|
|
|
Company Profile
HeidelbergCement AG produces cement, aggregates, concrete, and other building materials. The company, which was founded in 1873, is ranked No. 3 globally in cement and No. 1 in aggregates following the acquisition of Hanson. HeidelbergCement operates from more than 2.500 locations.
1yr Price Performance
100 |
|
|
|
90 |
|
|
|
80 |
|
|
|
70 |
|
|
|
60 |
|
|
|
50 |
|
|
|
Nov-17 |
Feb-18 |
May-18 |
Aug-18 |
HEIG.DE |
|
EURO STOXX PRICE (Rebased) |
Margin Trends
120 |
|
|
|
|
|
100 |
|
|
|
|
|
80 |
|
|
|
|
|
60 |
|
|
|
|
|
40 |
|
|
|
|
|
20 |
|
|
|
|
|
0 |
|
|
|
|
|
15 |
16 |
17 |
18E |
19E |
20E |
EBITDA Margin |
|
EBIT Margin |
Growth & Profitability
40 |
|
|
|
|
140 |
30 |
|
|
|
|
120 |
20 |
|
|
|
|
100 |
|
|
|
|
80 |
|
10 |
|
|
|
|
|
|
|
|
|
60 |
|
0 |
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
10 |
|
|
|
|
20 |
20 |
|
|
|
|
0 |
15 |
16 |
17 |
18E |
19E |
20E |
Sales growth (LHS) ROE (RHS)
Solvency
60 |
|
|
|
|
10 |
50 |
|
|
|
|
8 |
40 |
|
|
|
|
6 |
30 |
|
|
|
|
|
|
|
|
|
4 |
|
20 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
2 |
0 |
|
|
|
|
0 |
15 |
16 |
17 |
18E |
19E |
20E |
|
|
Net debt/equity (LHS) |
|
Net interest cover (RHS) |
|
Xavier Marchand
+44(207)545-1400 xavier.marchand@db.com
Fiscal year end 31-Dec |
2015 |
2016 |
2017 |
2018E |
2019E |
2020E |
|
|
|
|
|
|
|
Financial Summary |
|
|
|
|
|
|
DB EPS (€) |
92.23 |
3.66 |
6.27 |
6.20 |
6.56 |
7.51 |
Reported EPS (€) |
92.23 |
3.66 |
6.27 |
6.20 |
6.56 |
7.51 |
DPS (€) |
1.30 |
1.60 |
1.90 |
2.17 |
2.62 |
3.00 |
BVPS (€) |
79.37 |
80.92 |
73.37 |
76.61 |
81.00 |
85.89 |
Weighted average shares (m) |
188 |
193 |
198 |
198 |
198 |
198 |
Average market cap (€m) |
13,103 |
14,809 |
17,122 |
11,786 |
11,786 |
11,786 |
Enterprise value (€m) |
18,272 |
24,223 |
26,053 |
22,250 |
21,273 |
20,255 |
|
|
|
|
|
|
|
Valuation Metrics |
|
|
|
|
|
|
P/E (DB) (x) |
0.8 |
21.0 |
13.8 |
9.6 |
9.1 |
7.9 |
P/E (Reported) (x) |
0.8 |
21.0 |
13.8 |
9.6 |
9.1 |
7.9 |
P/BV (x) |
0.95 |
1.10 |
1.23 |
0.78 |
0.73 |
0.69 |
FCF Yield (%) |
2.9 |
5.2 |
4.6 |
5.2 |
9.1 |
10.8 |
Dividend Yield (%) |
1.9 |
2.1 |
2.2 |
3.7 |
4.4 |
5.1 |
EV/Sales (x) |
1.05 |
1.60 |
1.51 |
1.26 |
1.14 |
1.03 |
EV/EBITDA (x) |
1.1 |
8.2 |
7.4 |
7.3 |
6.6 |
5.9 |
EV/EBIT (x) |
1.1 |
12.2 |
10.8 |
11.4 |
10.0 |
8.7 |
|
|
|
|
|
|
|
Income Statement (€m) |
|
|
|
|
|
|
Sales revenue |
17,331 |
15,166 |
17,267 |
17,592 |
18,685 |
19,586 |
Gross profit |
17,331 |
2,939 |
3,523 |
3,049 |
3,218 |
3,433 |
EBITDA |
17,331 |
2,939 |
3,523 |
3,049 |
3,218 |
3,433 |
Depreciation |
0 |
955 |
1,109 |
1,095 |
1,095 |
1,095 |
Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
EBIT |
17,331 |
1,984 |
2,414 |
1,954 |
2,123 |
2,338 |
Net interest income(expense) |
0 |
-494 |
-391 |
-350 |
-310 |
-270 |
Associates/affiliates |
0 |
38 |
51 |
40 |
45 |
50 |
Exceptionals/extraordinaries |
0 |
-3 |
51 |
0 |
0 |
0 |
Other pre-tax income/(expense) |
0 |
-324 |
-133 |
110 |
0 |
0 |
Profit before tax |
17,331 |
1,205 |
1,941 |
1,754 |
1,858 |
2,118 |
Income tax expense |
0 |
305 |
606 |
403 |
427 |
487 |
Minorities |
0 |
190 |
141 |
120 |
130 |
140 |
Other post-tax income/(expense) |
0 |
0 |
0 |
0 |
0 |
0 |
Net profit |
17,331 |
706 |
1,244 |
1,230 |
1,301 |
1,491 |
DB adjustments (including dilution) |
0 |
0 |
0 |
0 |
0 |
0 |
DB Net profit |
17,331 |
706 |
1,244 |
1,230 |
1,301 |
1,491 |
|
|
|
|
|
|
|
Cash Flow (€m) |
|
|
|
|
|
|
Cash flow from operations |
1,283 |
1,812 |
1,831 |
1,617 |
1,972 |
2,168 |
Net Capex |
-908 |
-1,040 |
-1,035 |
-1,000 |
-900 |
-900 |
Free cash flow |
375 |
772 |
796 |
617 |
1,072 |
1,268 |
Equity raised/(bought back) |
0 |
788 |
0 |
0 |
0 |
0 |
Dividends paid |
-141 |
-244 |
-318 |
-377 |
-431 |
-520 |
Net inc/(dec) in borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
Other investing/financing cash flows |
1,438 |
-5,029 |
-172 |
-180 |
180 |
150 |
Net cash flow |
1,672 |
-3,713 |
306 |
60 |
821 |
897 |
Change in working capital |
-22 |
97 |
7 |
-80 |
-30 |
-30 |
|
|
|
|
|
|
|
Balance Sheet (€m) |
|
|
|
|
|
|
Cash and other liquid assets |
1,351 |
1,972 |
2,109 |
2,109 |
2,109 |
2,109 |
Tangible fixed assets |
9,871 |
13,913 |
12,814 |
12,799 |
12,424 |
12,079 |
Goodwill/intangible assets |
10,439 |
12,412 |
11,471 |
11,471 |
11,471 |
11,471 |
Associates/investments |
1,907 |
2,463 |
2,201 |
2,011 |
1,806 |
1,586 |
Other assets |
4,807 |
6,359 |
5,963 |
6,011 |
6,029 |
6,047 |
Total assets |
28,374 |
37,120 |
34,558 |
34,401 |
33,839 |
33,292 |
Interest bearing debt |
6,316 |
10,748 |
10,590 |
10,485 |
9,619 |
8,677 |
Other liabilities |
6,082 |
8,580 |
7,916 |
7,251 |
6,724 |
6,199 |
Total liabilities |
12,398 |
19,328 |
18,506 |
17,735 |
16,343 |
14,876 |
Shareholders' equity |
14,915 |
16,055 |
14,558 |
15,201 |
16,071 |
17,042 |
Minorities |
1,061 |
1,737 |
1,494 |
1,464 |
1,424 |
1,374 |
Total shareholders' equity |
15,976 |
17,792 |
16,052 |
16,666 |
17,496 |
18,416 |
Net debt |
4,966 |
8,776 |
8,481 |
8,376 |
7,510 |
6,568 |
|
|
|
|
|
|
|
Key Company Metrics |
|
|
|
|
|
|
Sales growth (%) |
37.4 |
-12.5 |
13.9 |
1.9 |
6.2 |
4.8 |
DB EPS growth (%) |
nm |
-96.0 |
71.4 |
-1.1 |
5.7 |
14.6 |
EBITDA Margin (%) |
100.0 |
19.4 |
20.4 |
17.3 |
17.2 |
17.5 |
EBIT Margin (%) |
100.0 |
13.1 |
14.0 |
11.1 |
11.4 |
11.9 |
Payout ratio (%) |
1.4 |
43.7 |
30.3 |
35.0 |
40.0 |
40.0 |
ROE (%) |
123.5 |
4.6 |
8.1 |
8.3 |
8.3 |
9.0 |
Capex/sales (%) |
5.2 |
6.9 |
6.0 |
5.7 |
4.8 |
4.6 |
Capex/depreciation (x) |
na |
1.1 |
0.9 |
0.9 |
0.8 |
0.8 |
Net debt/equity (%) |
31.1 |
49.3 |
52.8 |
50.3 |
42.9 |
35.7 |
Net interest cover (x) |
nm |
4.0 |
6.2 |
5.6 |
6.8 |
8.7 |
Source: Company data, Deutsche Bank estimates
Deutsche Bank AG/London |
Page 59 |
vk.com/id446425943
3 December 2018
Building Materials
European Building & Construction
Rating |
|
Company |
|
+44-20-754-51400 |
|
||
|
|
|
|||||
Hold |
|
Kingspan |
|
||||
|
|
|
|
|
|
Xavier Marchand |
|
|
|
|
|
|
|
Research Analyst |
|
Europe |
|
|
|
|
|
xavier.marchand@db.com |
|
|
|
|
|
|
|
|
|
Ireland |
|
|
|
|
|
|
|
Building & Construction |
|
|
|
|
Price at 28 Nov 2018 (EUR) |
37.70 |
|
|
Reuters |
Bloomberg |
|
|
|
|
|
|
|
Price Target (EUR) |
45.00 |
||||
Building Materials |
|
|
|
|
|||
|
KSP.I |
KSP ID |
|
|
|
|
|
|
|
52-week range (EUR) |
43.60 - 32.60 |
||||
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kingspan (Downgrade to HOLD)
With this note, we transfer primary coverage of Kingspan from Priyal Mulji to Xavier Marchand with immediate effect.
Promising structural growth story but fairly valued
Kingspan has been YTD the best performed across the sector (+2% vs. -20%). This is due notably to a better pricing power vs. sectors’ other companies, positive M&A contribution as well as reassuring comments made during the course of the year on the UK market. While the stock has since Brexit consistently traded at a 20-30% discount vs. sector’s peers (Geberit and Sika), after this year's strong performance, the discount has faded to c10%, in line with pre Brexit levels. In our view, this could leave the stock vulnerable to any negative comment on the UK market. In addition, Kingspan has the sector’s highest exposure to new-build construction activity (c70% of sales) which is more cyclical than the renovation segment at a time where investors are increasingly cautious on the longevity of the construction cycle in Europe and North America. While we still like Kingspan proven track record of structural growth ahead of construction markets, we believe the risk-reward profile is now more balanced. Downgrade to HOLD.
Kingspan at a glance
Figure 120: 2018E Sales and EBITA by division
Environmental |
Access Floors |
Environmental |
Access Floors |
|
4% |
3% |
4% |
||
|
5%
|
|
Light & Air |
|
Light & Air |
|
5% |
|
|
Insulated |
||
7% |
|
||
|
Panels |
||
|
|
||
|
|
62% |
|
Insulation |
Insulated |
Insulation |
|
Boards |
|||
Boards |
|||
Panels |
|||
26% |
|||
19% |
|||
65% |
|||
|
|||
|
|
||
Source:Deutsche Bank estimates, Company data |
|
|
|
|
|
||
|
|
|
Key changes |
|
|
TP |
46.50 to 45.00 ↓ |
-3.2% |
Rating |
Buy to Hold ↓ |
|
Source: Deutsche Bank |
|
|
Price/price relative
60 |
|
|
40 |
|
|
20 |
|
|
0 |
|
|
2016 |
2017 |
2018 |
|
|
Kingspan |
|
|
DJ (.STOXXE) (Rebased) |
|
|
|
|
|
|
||||
Performance |
1m |
3m |
12m |
||||
(%) |
|
|
|
|
|
|
|
Absolute |
-1.8 |
-9.9 |
10.1 |
||||
DJ |
0.9 |
-9.3 |
-10.6 |
||||
(.STOXXE) |
|
|
|
|
|
||
Source: Deutsche Bank |
|
|
|
|
|
||
|
|
|
|
|
|
||
Key indicators (FY1) |
|
|
|
|
|
||
ROE (%) |
|
|
|
|
19.8 |
||
Net debt/equity (%) |
|
|
|
|
41.7 |
||
Book value/share (EUR) |
|
10.0 |
|||||
Price/book (x) |
|
|
|
|
3.8 |
||
Net interest cover (x) |
|
21.9 |
|||||
EBIT margin (%) |
|
|
|
|
9.7 |
||
Source: Deutsche Bank |
|
|
|
|
|
||
|
|
|
|||||
Stock & option liquidity data |
|
|
|||||
Market cap (EUR)(m) |
|
6,742.8 |
|||||
Shares outstanding (m) |
|
181 |
|||||
Free float (%) |
|
|
|
|
– |
||
Option volume (und. shrs., 1M avg.) |
– |
||||||
|
|
|
|
|
|
||
Source: Deutsche Bank |
|
|
|
|
|
||
Page 60 |
Deutsche Bank AG/London |