Wienerberger confirmed at BUY, TP EUR 25 - Raising estimates and target price

Alongside its compelling 2Q 20 results Wienerberger presented a more upbeat market assessment and raised its earnings guidance for the current year. Based on an anticipated market decline of up to 10% across the group (vs. up to 15% before) the new target range for l-f-l EBITDA amounts to EUR 480-500 mn, an upgrade by EUR 20 mn. According to the company, the strong rebound in June was followed by solid trading in July (which we interpret as sales just slightly down yoy). Assuming that the groups FY 20e revenue dynamics can slightly outperform the market, we are confident that the upper end of the corridor is achievable, mirrored by our revised projection of EUR 502 mn. We remain advocates of the investment case as an assumed recovery of the underlying markets (with state subsidies for residential housing and public infrastructure programmes in response to the Covid-19 crisis as potential support factors) should be substantiated by Wienerbergers planned growth investments. Operating leverage coupled with further cost savings from the Fast Forward Programme and the scope for some energy cost deflation into next year (delayed benefits to the price-cost spreads from the forward buying strategy) should safeguard earnings growth and allow for a compelling cash conversion (FCF yield of ~9%). With FY 20-21e EV/EBITDA multiples of 6.6x and 5.8x we deem the valuation attractive, both compared to its historical level (~6.8x) and vs. the peer group (median 8.0 and 7.7x, respectively). We confirm the BUY recommendation for Wienerberger and raise the price target to EUR 25 from EUR 20.