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On Thursday, UBS analyst Gregor Kuglitsch updated the price target for Heidelberg (ETR:HDDG) Materials AG (HEI:GR) (OTC: HDELY), increasing it to €155.00 from the previous target of €128.00. Despite the adjustment in the price target, the analyst has kept a Neutral rating on the stock.
Kuglitsch’s revision follows a notable rally in Heidelberg Materials’ stock, attributed to a re-rating from a lower base. The analyst noted that the risk/reward balance remains even, especially when considering the broader sector, which has seen strong re-rating in multiples. Moving away from a Discounted Cash Flow (DCF) valuation, UBS now bases its valuation on Sum of the Parts (SOP), resulting in the new target price.
The new SOP valuation takes into account an 11x EV/EBITDA multiple for Heidelberg Materials’ North American segment and approximately 6x for the rest of its operations. Kuglitsch pointed out that the company’s absolute multiples appear relatively undemanding, with an 11x P/E and 7.3x EV/EBITDA projected for 2025, aligning with historical averages.
The UBS analyst suggested that there could be potential for upside if earnings within the European sector are re-rated more strongly. Conversely, he also warned of possible downside risks if the industry’s robust pricing environment begins to decline.
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