Heidelberg, Saint-Gobain, Wienerberger, construction stocks with most potential

construccion gruas

Morgan Stanley: The construction sector (SXOP) trades at a premium in line with the 10Y average, not reflecting the increase in returns the sector has seen since 2018. According to Cedar Ekblom, 12M forward ROE SXOP/SXXP is 12% versus the 10Y average of -1%.

Within the sector it is noted that the discount in valuation weighs more among heavyside companies, which trades at 11x P/E (-19% discount vs historical) against an in-line valuation of lightside 21.5x P/E. The analyst team compares the ROIC of heavyside vs lightside between 2019 and 2024e, estimating a +250bps increase in the former, versus -220/-430 (lightside and building products), a contrast that is not reflected in the valuation. They therefore identify stocks with higher sector potential in Heidelberg (Overweight), Buzzi (Equalweight), Saint-Gobain (Overweight), and Wienerberger (Overweight).

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The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.