Wienerberger confirmed at BUY, TP EUR 30.5 - Raising estimates and target price after guidance increase

We have been vocal post Wienerbergers Q3 results release that the l-f-l EBITDA target of some EUR 500 mn implies an unduly cautious Q4 performance, even amid revived lockdown measures. However, the actual magnitude of caution still caught us by surprise as the upward revision of the l-f-l EBITDA guidance to approx. EUR 545 mn was well ahead of RBIe of EUR 513 mn. Hence, Q4 EBITDA should come in at ca. EUR 113 mn or roughly 2/3 higher than the former implied figure. Apparently demand in November and early December held up better than assumed, which coupled with benign weather conditions allows Wienerberger to sustain production levels and capacity utilisation towards year-end. Moreover, it seems that better progress as regards the Fast Forward Programme was also a contributing factor. As a consequence, we have aligned our FY 20e earnings forecasts with the new outlook and due to the higher base also raise FY 21-22e earnings, leading to an average EBITDA increase of 7%. In turn, the target price rises to EUR 30.5 from EUR 28 and we reiterate the BUY rating. The pillars of the investment case remain intact. Despite potentially more challenging demand fundamentals, the groups focus on cost and efficiency improvements as well as the strengthening of the product portfolio (incl. divestments) and pricing discipline should safeguard earnings and margin growth going forward. The management remains determined to grow via M&A. The valuation appears compelling, in our view, with >25% discounts to the sector on FY 21-22e EV/EBITDA and high single-digit FCF yields.