Recovery yet not in sight for building materials - JPM

Rockwool A/S

07/12/2023 10:41

** J.P.Morgan says that though European Building Materials
sector outperformed in 2023 amid "unprecedented" positive
price/cost spread it is still premature to call for a recovery
        ** It expects volumes to continue to be soft at least in
the first half of 2024 as risks on pricing remains
    ** It notes lead indicators remain depressed, in particular
in non-residential new build activity
    ** The sector is up around 35% YTD (vs. market up 11%),
which the broker attributes to companies comments on potential
bottoming out of volumes, expectations over rate cuts in 2024
    ** It cuts Rockwool  ROCKb.CO  (-3.6%) to "underweight" from
"neutral" saying that the recent rally in share performance
leaves the shares vulnerable given continued risks on pricing
    ** Rockwool shares have been outperforming the sector (up
23% versus sector up 14%), the broker notes, as it questions the
sustainability of the company's EBIT margin guidance of 14% this
year which compares to typical margins of 13%
    ** It cuts Kingspan  KSP.I  to "underweight" and remains UW
on Travis Perkins  TPK.L  
    ** JPM upgrades Sika  SIKA.S  to "neutral" from
"underweight", following the underperformance YTD, while its top
picks are CHR and Heidelberg  HEIG.DE  (both "overweight")

 (Reporting by Elviira Luoma)
 ((Elviira.luoma@thomsonreuters.com))