(BFM Bourse) – The American establishment went from “buy” to “neutral” on the construction materials specialist, fearing that the company’s margins and results will have reached their peak in 2023. Activity in the renovation in France and the United States could also be lower than expected.
The oldest company in the CAC 40 impressed last year. The construction materials producer Saint Gobain, whose origins date back to the 17th century, quite simply signed the second best stock market performance in the Parisian index (+46%), ahead only of Stellantis (+59.23%).
The company has managed, with each publication, to exceed investors’ expectations, benefiting from the reorientation of its activity towards promising professions, such as construction chemicals. The renovation market also provided welcome support in the face of the marked decline in that of new construction in many countries.
But the year 2024 could prove less promising for Saint-Gobain. In any case, this is what Bank of America thinks, which on Wednesday lowered its advice on the value, going from “buy” to “neutral”, with a price target reduced to 68 euros compared to 70 euros previously.
This weighs on the action, Saint-Gobain showing a drop of 2.5% this Wednesday around 3 p.m., the largest decline in the CAC 40, in a sluggish market (the CAC 40 is stable at the same time).
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France and the United States under pressure?
In a note dedicated to European construction groups, Bank of America says it is “cautious” in the sector.
“Investors appear to be expecting a ‘super Goldilocks’ environment of volume recovery, supported by lower rates, resilient pricing and low input costs, which would further improve margins. This seems optimistic “, warns the American establishment which, on the contrary, has doubts both about volumes and prices.
In the case of Saint-Gobain, Bank of America points out that the impressive resilience displayed by the company last year was due to stable profits in France and improved profitability in the United States. These two markets allowed the group to offset the pressures exerted in the “Northern Europe” region, namely the Scandinavian countries, Germany, the United Kingdom and Eastern Europe.
However, “while we expect Northern Europe to continue its decline in 2024 (at a more moderate pace thanks to an easier base effect on volumes), we believe that Saint-Gobain could be faced with downside risks in its activities in France and the United States,” warns the establishment.
Bank of America considers that the renovation market will not be spared in these two countries, despite the increase in France in the budget of the MaPrimeRenov system (a bonus paid by the government for insulation, heating or ventilation work ), which increases from 2.4 billion euros in 2023 to 4 billion in 2024.
The establishment notes that it is becoming increasingly complex to access this system, with home owners with a DPE “F” or “G” who must now carry out two works linked to energy efficiency (compared to one previously) and improve the DPE by two ranks (against one previously).
A more attractive valuation
Furthermore, Saint-Gobain has, in recent years, created value and strengthened its stock market profile through asset rotations, that is to say disposals and acquisitions. Bank of America believes the group should continue to buy back mid-sized and large targets rather than using its cash to repurchase shares.
However, the establishment argues that with higher financing costs due to the recent rise in rates, external growth operations financed via debt are less attractive than share buybacks.
“We believe that, to improve returns (and valuation) over time, the group should focus on further divestments of underperforming assets and improving the margins of its existing operations” , adds the bank.
Last point: valuation. Bank of America points out that Saint-Gobain remains, of course, relatively cheap, but that the stock has nevertheless seen a recent appreciation of its stock market multiples. Result: the value does not present as attractive a discount as it did a few months ago.
Saint-Gobain will have the opportunity to present its outlook for the current year when it publishes its 2023 results on February 29.
Julien Marion – ©2024 BFM Bourse
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