Bekaert Too cheap to ignore, given structural improvements – upgrade to BUY
After the recent share price weakness, Bekaert is trading at historically low multiples, even when acknowledging for a likely tougher short term macro environment which has prompted us to cut our uEBIT margin forecasts for 2H22 and 2023 to respectively 6.7% and 7.7% (vs the medium term ambition of 9-11%). The good news is that Bekaert has the balance sheet strength to significantly benefit from the current share price weakness, and even stepping up the current € 120m share buyback to € 200m/year in each of the following five years would keep net debt/EBITDA below 1x over that entire time horizon while the combined hypothetical € 1bn buybacks and the corresponding ordinary dividend pay-out over that period (c € 0.4bn) would together represent over 85% of current market cap. We can no longer ignore the very compelling valuation and decided to upgrade from Accumulate to BUY, while maintaining our target price at € 47.Bekaert is a global technological and market company engaged in advanced solutions based in steel wire transformation and coatings as well as an independent manufacturer of drawn steel wire products. In addition, Co. teams up with customers and suppliers globally to develop, implement, upgrade, and protect both current and future technologies. Co.'s business activities are put in practice along two main axes: Product Innovation and Process Innovation. Product Innovation helps Co. better serve its customers, while Process innovation enables Co. to increase operational effectiveness, minimizing its impact on the environment.
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