Wienerberger confirmed at BUY, TP EUR 20 - Sound FY 20 guidance and incorporation of 1Q impairments

In the aftermath of the 1Q 20 results release we confirm the BUY recommendation for Wienerberger and tweak the price objective to EUR 20 from EUR 19. Apart from incorporating the impairments digested in 1Q in our FY 20e estimates, we have slightly raised our EBITDA estimates throughout FY 22e. We acknowledge that in this unprecedented situation, a firm assessment on the development of trading conditions is particularly challenging and thus appreciate that the management has presented its baseline scenario for the current year, which is predicated on a 15-20% market decline (assuming no further lockdown measures). 2Q will show the peak impact with demand in April and May seen comparable to the plunge of up to -30% that was experienced in late March. The scenario is based on a gradual easing of government-imposed lockdowns in Europe (e.g. production in FR, UK and IT should be resumed in the coming weeks), which paves the way for demand to normalise. Referring to Austria as an example, it was noted that demand has quickly recovered to roughly 80% of the pre-Covid-19 level. Hopes are also pinned on public stimulus programmes for infrastructure projects, which could make the piping business more resilient. The assumptions for North America appear more depressed with housing demand being impacted more strongly. Against this backdrop the company does not see the need for plant closures at the moment.