Wepa : Instrument rating upgrade to Ba3 likely

Wepa’s performance is normalising towards the long-term 13-14% adj. EBITDA margin guidance. The company was always open about that fact, therefore we do not see the Q2 25 results as weak per se.

Capex will be elevated in FY 25 and FY 26 due to an expansion project in the UK, which adds about 30k tons of finished products capacity.

At “normal” capex spending of EUR 90m p.a. it is still a levered free cash flow producing company. The company had net leverage (comp. def.) at 2.0x and solid liquidity at end-June 2025. A Moody’s upgrade is very likely, which would lift Wepa’s instruments ratings to Ba3 and BB.

The 2027 bond is not offering much on a YTW basis (3.2% with an assumed workout on 15 Dec 2027). But an earlier call, e.g. at end-April 2026 (with a fresh set of full year numbers) would provide a yield of 4.2%. So, there is some upside given the below-par screen price.

The 2031 bond offers still a premium vs. our group of peer bonds albeit the workout dates and business models do not fit in some cases. A rating upgrade by Moody’s makes the paper interesting from a yield/rating perspective.

We affirm our Stable Credit Opinion (factoring in already the potential Moody’s upgrade) and our Neutral (2027) and Buy (2031) recommendations.