On European building materials, HSBC prefers lightside names

Vicat SA

28/03/2022 12:31

** HSBC sees value across the European buildings materials
sector, pointing to positive new build and renovation
construction output and heavyside low trading enterprise
multiples 
    ** The broker prefers building product companies
(lightside)for their strong EBIT growth at an "even more
reasonable price" 
    ** It flags their renovation and energy efficiency exposures
as a driver of growth and notes their "importance to energy
policy has increased beyond climate change mitigation to energy
security"
    ** HSBC projects "substantial upside" in Switzeland's Sika
 SIKA.S , France's Saint Gobain  SGOB.PA  and Austria's
Weinerberg  WBSV.VI  (all "buy"), who it names as its top picks
    ** It upgrades Irish insulation maker Kingspan  KSP.I  to
"buy" from "hold" on its attractive long-term growth prospects
through acquisitions and R&D
    ** For building materials (heavyside), it sees more
selective value since higher energy costs are "an encumbrance", 
demand drivers are cyclical and the decarbonisation challenge of
the cement and manufacturing industries remain a key concern
    ** The broker thus cuts cement manufacturers Buzzi Unicem
 BZU.MI  and Vicat  VCTP.PA  to "hold" from "buy"
    ** It prefers developed markets infrastructure-oriented
Breedon  BREE.L  and CRH  CRH.L , as they should benefit from
substantial infrastructure programs and have exemplary margin
management track records and outlooks
    ** Overall, HSBC expects "resilient margins for the
lightside and pressure for the heavyside in our 2024 forecast
horizon"

 (Reporting by Elena Vardon)
 ((elena.vardon@tr.com))