On Monday, Belimo Holding AG (BEAN:SW) (OTC: BLHWF) received an updated stock price target from Morgan Stanley, with the new target set at CHF495, an increase from the previous CHF465. The firm maintained its Equalweight rating on the stock.
The revision follows Belimo's first-half results for 2024, which prompted Morgan Stanley to adjust its forecasts for the company's performance in the Americas region. The analyst at Morgan Stanley anticipates a substantial upturn in the region's revenue, projecting a 18% growth in local currency for the full year 2024, a significant revision from the earlier estimate of 8%.
This adjustment is expected to contribute to the group's overall local currency growth, which is now estimated at 10.5% for the fiscal year 2024, aligning with the company's own guidance.
Morgan Stanley also altered its expectations for Belimo's earnings before interest and taxes (EBIT) for the fiscal year 2024, raising the forecast to CHF178 million, which corresponds to a margin of 19.1%. This estimate is in line with the guidance provided by Belimo's management.
The stock price target increase to CHF495 is based on a blended approach using discounted cash flow (DCF) and dividend discount model (DDM) methodologies, with the weighted average cost of capital (WACC) remaining unchanged.
Looking further ahead, the firm projects a compound annual growth rate (CAGR) in local currency of 9% from 2023 to 2030, which is consistent with the mid-term guidance of 8-10% provided by Belimo's management. Moreover, the EBIT margin is forecasted to improve to 21% by the fiscal year 2030, up from the 19% margin expected for 2024.
The analyst highlighted Belimo's solid cash generation and its strong cash-rich balance sheet, which supports a dividend payout policy of 100% of free cash flow. The terminal growth rate for the company is estimated at 2.5%.
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