Investing.com -- Berenberg has upgraded Compagnie de Saint Gobain SA (EPA:SGOB) stock to Buy rating, citing the recent approximately 25% decline in share price due to concerns about U.S. tariffs as an attractive entry point.
The firm has maintained its EUR94 price target for the stock and has made no material changes to its earnings forecasts.
Despite the macroeconomic concerns and the introduction of U.S. tariffs causing uncertainty in global markets, Berenberg views the direct impact on Saint-Gobain as limited.
The company generates around 20% of its revenue from products manufactured domestically in the U.S. Berenberg also notes that, although there are worries about a potential slowdown in European GDP, the European construction markets have been in decline for three years, and Saint-Gobain's 2022-24 European volumes are down by approximately 16%.
Berenberg analysts expect Saint-Gobain's average revenue growth and EBIT growth of around 4% and 6%, respectively, over the next three years.
Saint-Gobain has significantly reshaped its portfolio in recent years, rotating approximately 40% of revenue through asset sales and acquisitions, which has led to a more focused portfolio and an estimated 300 basis points positive impact on the EBITDA margin.
Berenberg believes the company's restructuring efforts will continue and estimates that a further 20% evolution of revenue could enhance the margin by an additional 150 basis points.
The company's management has improved the group EBIT margin from about 7% historically to around 11% through portfolio evolution and a more disciplined approach to price and margin management. This has been supported by a streamlined global operating structure. Berenberg forecasts a continued improvement in the EBIT margin, expecting it to rise from 11.4% in 2024 to close to 13% over time.
In terms of valuation, Saint-Gobain trades at 9 times EV/EBIT and 11 times EPS, which Berenberg believes is below the fair value of 12 times and 13 times, respectively.
