Citi has reaffirmed its positive stance on GEA Group AG (G1A: GR) (OTC: GEAGY), maintaining a Buy rating and a price target of EUR48.10. The endorsement followed attendance at GEA's Capital Markets Day (CMD) in Amsterdam, where the company's long-term financial ambitions were presented.
GEA Group, a leading supplier in the food, beverage, and pharmaceutical sectors, outlined its profitability goals for 2030, aiming for an EBITDA margin of 18% and an EBITA margin of 16%. These targets are in line with Citi's own projections for the company's performance at the end of the decade. The firm highlighted GEA's gross margin expansion and several growth initiatives as key drivers behind these targets.
The analyst observed that while initial skepticism was present regarding GEA's organic sales compound annual growth rate (CAGR) of over 5% from 2024 to 2030, the presentations at CMD showcased solid growth initiatives.
These initiatives span across sustainability, new food technologies, and digital sales and services, suggesting a conservative estimate for growth in the conventional equipment business.
Additionally, GEA's target of achieving EUR 4 billion in cumulative free cash flow (FCF) from 2024 to 2030 aligns with Citi's expectations, which forecast the company's average FCF yield to be in the high single digits through 2030. This forecast compares favorably with sector peers, particularly highlighting GEA's compelling growth prospects.
Citi concluded that if GEA Group meets its 2030 targets, which include achieving an EBITA of EUR 1.2 billion, the company's shares could be valued between EUR 55 and EUR 65 by 2025. The higher end of this valuation range is possible if GEA re-rates to 13 times EV/EBITA, representing a 20% premium over the sector.
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