On Friday, BNP Paribas (OTC:BNPQY) Exane began coverage of Bekaert (EBR:BEKB), a global steel wire transformation and coatings company, with a Neutral stock rating and a price target of EUR 35.00. The company, listed on the Euronext (EPA:ENX) Brussels (BEKB:BB) and over-the-counter (OTC: BEKAY), has encountered significant volume challenges since late 2022.
With annual revenues of $4.36 billion and an EBITDA of $547 million, Bekaert maintains a substantial market presence despite current headwinds. However, Bekaert's management has been proactive, focusing on footprint rationalization and successfully passing through inflation-related costs, thereby maintaining margins and cash flow.
Bekaert's strategy includes a shift towards more premium and innovative product offerings, yet BNP Paribas Exane views the company's mid-term growth target of approximately 5% like-for-like (LFL) as overly optimistic, forecasting closer to 4% growth by 2026. The firm anticipates only modest growth for Bekaert in 2025, attributing the sluggish outlook to reduced demand in the construction sector and from tire manufacturers.
The firm's analysts also point to Bekaert's significant exposure to European and Chinese markets, which represent about 60% of its sales, as a potential obstacle, especially considering the current geopolitical climate that could lead to higher trade tariffs. Additionally, ongoing reorganization within Bekaert has been identified as a factor that may continue to hinder growth.
Despite these concerns, Bekaert's shares are trading at a five-year low, with a 12-month price-to-earnings ratio of 7.24x. This valuation suggests that much of the negative news may already be reflected in the current stock price. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations.
The company also boasts an impressive 33-year track record of maintaining dividend payments, demonstrating long-term financial stability. InvestingPro subscribers have access to 10 additional key insights about Bekaert's financial health and market position. BNP Paribas Exane's analysts have stated that they are looking for an improved Purchasing Managers' Index (PMI) environment, greater clarity on tariffs, and the resolution of Bekaert's internal issues before adopting a more positive stance.
The EUR 35.00 price target set by BNP Paribas Exane is based on an average of sum-of-the-parts (SOTP) valuation and market-relative assessment. Their scenario analysis indicates that the stock could potentially face a downside of 10% or an upside of 20%.
For a deeper understanding of Bekaert's valuation metrics and growth potential, InvestingPro offers comprehensive financial analysis and real-time Fair Value calculations that can help investors make more informed decisions.
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