On Tuesday, Deutsche Bank (ETR:DBKGn) updated its stance on Forterra (NASDAQ:FRTA) Plc (FORT:LN) (OTC: FTTRF), raising the price target to £2.60 from £2.00, while reaffirming a Buy rating on the stock. The adjustment follows Forterra's announcement that its EBITDA for the four months leading up to October 31 was in line with expectations. Consequently, the company has maintained its full-year EBITDA guidance of approximately £50 million.
According to the analyst from Deutsche Bank, the decision to maintain the 2024 and 2025 forecasts unchanged is bolstered by the adjustment of the 2026 estimates to align closer with the consensus levels. The analyst's commentary highlighted that Forterra's current trading on a 2024 P/E ratio of around 27x is projected to decrease to approximately 14x by 2026.
The valuation of Forterra by Deutsche Bank involves applying a P/E ratio of roughly 8x to the firm's estimate of normalized earnings. This valuation method underpins the new target price of 260p, which suggests a potential upside of about 38%. The analyst's reiterated Buy recommendation reflects confidence in the stock's performance.
Forterra's financial health, as indicated by the maintained EBITDA guidance, and the potential for a significant upside based on Deutsche Bank's analysis, contribute to the positive outlook for the company. The UK brick industry's delivery levels, which are still more than 30% below the figures from 2019, play a role in the valuation and the expectations for Forterra's future market performance.
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