Rate cuts to benefit building materials sector, HSBC say

Vicat SA

10/09/2024 12:32

** HSBC says a possible turn in the interest rate cycle should
lead to a recovery in residential demand in 2025, boosting
building materials producers
    ** The analysts expect rate cuts of 150 basis points in the
U.S. and Europe from September 2024 to end-2025
    ** HSBC forecasts light building materials producers'
EBIT/EBITDA to grow 8% in 2025, with heavy materials makers
lagging behind without energy cost deflation benefits
    ** It prefers Saint-Gobain  SGOB.PA  and Sika  SIKA.S  in
light materials due to their high residential and renovation
exposure, and the former's low valuation
    ** It likes CRH  CRH.N  and Cemex  CEMEXCPO.MX  in heavy
materials thanks to their high U.S. exposure, and low valuation
multiples for the latter
    ** It upgrades Vicat  VCTP.PA  to "buy" from "hold" after a
significant share price underperformance since October 2022
lows, and says the fall in energy prices should benefit its
EBITDA margin recovery in 2024-25 in emerging markets, while
also pointing to improved debt situation 
    ** It downgrades Heidelberg Materials  HEIG.DE  to "hold"
from "buy" as it expects weak pricing outlook in emerging
markets and continued negative price/cost spread to lead to slow
EBITDA progression
    ** Shares in Vicat are up 3.9%, while Heidelberg Materials
falls 1.5% by 1110 GMT

(Reporting by Michal Aleksandrowicz)
((mailto:michal.aleksandrowicz@tr.com))