Recticel Model update after weaker than expected 1Q update and deal uncertainty
Recticel saw a material decline in 1Q23 volumes with underlying revenue up 9.8% on the back of the consolidation effect from Trimo. Recticel guided for a materially lower FY23 adjusted EBITDA which compared to our and consensus forecasts of respectively +1% and +3%. We updated our model and now bank on a FY decline of 13%. Moreover, Carpenter has requested a substantial price cut vs the initially agreed € 656m (EV) on the Engineered Foams business, with Recticel considering its options. While we are still optimistic on the mid to long term growth prospects of Recticel's insulation business, the short term earnings pressure and deal uncertainty make it hard to find a share trigger. This morning, we decided to cut our rating from Accumulate to Hold with target price revised from € 21 to € 17.Recticel is engaged in the production of a variety of polyurethane foams that are used in the furniture, technical, automotive, bedding and insulation industries. The Flexible Foam Business Line covers the manufacture, conversion and marketing of flexible polyurethane foam. The types of flexible foams are classified as Comfort, Technical Foams and Composite Foams. Co. is also engaged in the manufacture of foams used in mattresses and slat bases. In addition, Co. manufactures rigid polyurethane and phenolic foams for thermal insulation. Co.'s automotive activities include: manufacturing moulded seat cushions, window encapsulation and manufacturing interior trim components.
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