Investing.com — UBS downgraded Saint Gobain (EPA:) to Impartial from Purchase in a observe Thursday, citing restricted upside potential following a robust 2024 efficiency and re-rating of shares. 

“With the shares trading at 12-13x P/E, we think there could still be some limited re-rating potential, but modest,” UBS analysts wrote. 

The downgrade comes amidst issues over rising rates of interest, which might negatively affect development expectations in residential finish markets. 

UBS’s working revenue forecast is barely beneath consensus at -1%, whereas EPS is projected to be -5% beneath consensus.

The financial institution’s observe highlights the challenges in sustaining the price/price dynamics that supported margins in 2024. 

“2024 was characterised by a year when volumes disappointed due to soft end markets but margins (guided to be up vs a record 11.0% in 2023) offset this,” UBS said. 

Whereas they estimate a modest constructive price/price affect of €50 million in 2025, the analysts warning that it is going to be tougher to attain comparable gross margin positive aspects as lately. 

With a projected natural EBIT development of +3% and complete development, together with M&A and FX, of +7%, UBS expects complete EBIT to succeed in €5,616 million, which is 1% beneath consensus.

Wanting forward, Saint Gobain’s upcoming Capital Markets Day (CMD) within the second half of the yr might function a catalyst, significantly if margin steerage is elevated. 

“We think a realistic target is 11-13%, bearing in mind some categories are at very elevated levels by historical standards,” UBS commented. In addition they level to potential portfolio adjustments, together with experiences of a sale of the automotive glass enterprise, although this has lately been denied.

UBS has adjusted its price goal to €92 per share, up barely from €91, primarily based on a reduced money stream valuation utilizing a WACC of 8% and a long-term post-tax ROIC of 10.5%.