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Investing.com - UBS downgraded Ontex Group NV (BR:EBR:ONTEX) stock rating from Buy to Neutral on Friday, while significantly reducing its price target to EUR6.80 from EUR11.70 following the company’s recent guidance cut.
The downgrade comes after Ontex announced a notable reduction in its fiscal year 2025 guidance on Wednesday, which UBS indicates has "significantly lowered both visibility and conviction" for volume and EBITDA improvement over the next 12 months.
UBS remains supportive of the turnaround strategy implemented by CEO Gustavo Calvo Paz, acknowledging several improvements including portfolio simplification, reduced leverage ratio from 6.4x at the end of 2022 to approximately 2.7x by mid-2025, and a near doubling of core market EBITDA margins to 12.0% in 2024 compared to 6.2% in 2022.
The firm also noted Ontex’s entry into the North American market with new contract wins expected to continue like-for-like revenue growth in the second half of 2025, despite EBITDA margins falling to 8.3% in Q2 2025.
UBS expressed concern that this second guidance reduction in less than 12 months may result in low investor confidence in future guidance, "limiting the re-rating potential over the next 12m" for the personal hygiene products manufacturer.
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