EFTA01385525.pdf

> Energy, Materials & Industrials Deutsche Bank Q Kingspan — Priyal Mulji, BUY, close €38.5, €40 tgt, 4% upside ■ Kingspan is a global insulation producer, focusing on high-performance We expect a step-up in organic growth... panels and boards. • We expect robust organic growth (5% p.a. to 20E). Kingspan should 5,000 woo Revenue, EUR m (Ihs) % YoY organic (rhs) 14% outperform its construction markets owing to its over-exposure to markets 4,500 - 12% 4,000 - with low penetration rates (the USA, EM and Mainland Europe) and end- 3.500 - 10% users' increasing focus on future-proofing buildings. 3.000 8% 2,500 • We see c4% upside to 2020E DBe forecasts if Kingspan meets its 2,000 - 6% penetration targets. 1,500 • 4% 1,000 - s We are already c2-3% ahead of consensus post-'17 on top line and 500 - 2% trading profit. 0 0% .1) # ■ M&A could drive c30% upside to our price target. We expect robust FCF/sales of 5-8% in coming years. ▪ r6) Source: Deutsc• he Bank. company data eP fiSfo% I - Levering to 2x net debt/EBITDA to spend on acquisitions would raise our forecast 20E EPS by up to c20%. ... but the valuation does not reflect this - Management has cited M&A as a likely growth driver 25 • Kingspan trades at a 24% discount to high-growth cyclical stocks. 23 Renishaw Comparing Kingspan's operational strengths (organic growth, EBITDA 2018E EV/EBITDA, x 21 Gebent Halms progression, scale of deleveraging and predictability and earnings) and 19 • • • EV/EBITDA to similar stocks such as Geberit and Halma illustrates that 17 Rotork Gvaudan Kingspan offers excellent value. • • pirax-Sacco 15 • • Catalysts: FY17 results on 23-Feb 13 4.Assa Abby • Kingspan Legrand 11 • Polypipe Related DB Research: 9 Kingspan: Insulated growth; Initiating on BUY (Munn 2% 3% 4% 5% 6% 7% Building & Construction: 2018 Outlook: Still opportunity (Johnsont 2018-20E average organic growth pa, % Source: Deutsche Bank. company data Deutsche Bank Research. European Equity Focus - Janualy 2018 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0086811 CONFIDENTIAL SDNY_GM_00232995 EFTA01385525