Wienerberger confirmed at BUY, TP EUR 28 - Stronger 3Q makes implied 4Q earnings look conservative

Wienerberger delivered considerably better than expected 3Q results that were spurred by a more resilient top-line development (-2% yoy). The management displayed great confidence that full-year l-f-l EBITDA should reach ~EUR 500 mn, while at the same time trying to dampen expectations for a more material outperformance. We acknowledge the second wave of infections and containment measures in Europe coupled with punchy comps and the usual weather uncertainty towards year-end but nevertheless think that the implied 4Q figures look overly conservative. This is mirrored by our raised l-f-l EBITDA of EUR 513 mn, up from EUR 502 mn. Incorporating the higher investment plans as well as the related earnings potential communicated at the Capital Markets Day at the end of September we increase the target price to EUR 28 from EUR 25 and maintain the BUY rating. Despite the negative effects of the pandemic on the volume development we think that the groups focus on cost and efficiency improvements as well as the strengthening of the product portfolio (incl. divestments) and pricing discipline (coupled with the scope of lower energy costs next year) should safeguard earnings and margin growth going forward. The management remains determined to grow via (potentially larger) M&A deals. The valuation appears compelling, in our view, with ~20% discounts to the sector on FY 21-22e EV/EBITDA and high single-digit FCF yields.