Barclays sees upside in Vicat stock with Senegal and US projects driving earnings growth

On Thursday, Barclays (LON:BARC) upgraded Vicat (EPA:VCTP) SA (VCT:FP) stock from Equalweight to Overweight and increased its price target from EUR41.00 to EUR47.00. The upgrade comes amid Barclays' perception of an attractive entry point due to the stock's underperformance related to emerging market demand risks and concerns over the company's leveraged balance sheet.

The Barclays analyst highlighted that Vicat is nearing the commissioning of its Senegal kiln 6, which is expected to contribute significantly to the company's earnings. This development, coupled with the company's strategic shift towards deleveraging, is anticipated to create a compelling cash flow narrative over the next few years, with potential yields of 16-17%.

Vicat's commitment to reducing its leverage ratio to below 1.2 times by the year 2026 is seen as feasible based on Barclays' projections. The analyst noted that in the current macroeconomic climate, companies that can drive growth through internal improvements are particularly appealing.

The analyst also pointed out the potential earnings boost from Vicat's operations in Senegal, which could add up to €60 million in run-rate earnings. Additionally, the completion of the Southeast US rail network, which is expected to increase volumes by 10% in 2025, was mentioned as a positive factor for the company's future performance.

This rating upgrade and price target adjustment reflect Barclays' confidence in Vicat's growth prospects and its ability to successfully navigate through the current economic landscape. The firm's emphasis on deleveraging and capitalizing on new operational capacities is expected to strengthen its financial position and enhance shareholder value.

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