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Investing.com -- Berenberg downgraded Hornbach Holding AG & Co. KGaA (ETR:HBH) to “hold” from “buy,” citing limited upside after a 34% year-to-date share price increase.
The decision follows a strong fiscal first-quarter performance and an upward revision in earnings estimates, but valuation concerns have led the bank to temper its recommendation.
The price target was raised to €105 from €100, reflecting modest potential upside of about 8% from the current price of €97.80.
While Q1 results exceeded expectations, Berenberg analysts said the stock’s performance had already priced in much of the positive momentum.
Hornbach reported group sales of approximately €1.91 billion, up 5.7% year over year and 4% above Berenberg’s forecast. Like-for-like sales grew 4.6%.
Adjusted EBIT rose 10.5% versus the prior year, surpassing estimates by 9%. Earnings per share were also 9% above projections.
Free cash flow for the quarter was €144 million, significantly ahead of the €14 million expected, supported by gentler working capital movements. Cash conversion reached 66%, with a margin of 7.6%.
Berenberg adjusted its EPS forecasts for 2025–2027 upward by up to 5%, now expecting EPS of €10.60 in 2025, €10.77 in 2026, and €10.98 in 2027.
However, the brokerage projects a relatively modest EPS CAGR of 2.3% from 2025 to 2029, alongside a 2.6% sales CAGR and 2.1% EBIT CAGR over the same period.
The company continues to grow its footprint across core markets. As of Q1 2025, Hornbach holds a 15.6% market share in Germany (up from 13.6% in 2020), 18.2% in Austria, 38.6% in the Czech Republic, 29.7% in the Netherlands, and 14.9% in Switzerland.
Despite operational strength, Berenberg noted that Hornbach now trades at a 17% premium to its five-year historical forward P/E and at about 10x 2026E P/E, a 15% discount to peers.
The analysts argue that this discount is warranted, given the company’s lower expected earnings growth compared to peer CAGRs, which range from 8.7% to 44% based on Visible Alpha data.
Berenberg also flagged that the free cash flow yield is expected to decline from 24.7% in 2023 to 9.2% in 2025 before recovering to 19.4% in 2027.
Dividend yield is projected to remain between 2.6% and 2.8% over the forecast period.