Bouygues upgraded by J.P. Morgan as Equans outlook lifts valuation

Investing.com -- J.P. Morgan upgraded Bouygues (EPA:BOUY) to “overweight” from “neutral,” raising its December 2026 price target to €49 from €38.

The shift comes after the investment bank said valuation risks tied to guidance downgrades and fibre joint venture consolidation have eased. Analysts now see Equans, Bouygues’ business services unit, as a key driver of upside.

Bouygues bought Equans from Engie in 2021 for €6.7 billion, a move widely seen as expensive at the time.

Since then, the multitechnical services industry has strengthened, supported by trends such as energy transition, on-shoring, grid upgrades and digital infrastructure. 

Peers like SPIE, Emcor and Bilfinger have seen their shares surge by 204%, 426% and 317% respectively since October 2021. 

Equans, which initially guided for a 5% EBIT margin by 2027, is now assumed by J.P. Morgan to reach 7% in the mid-term. This raises its valuation from €10 billion to €13.6 billion, with a potential “blue sky” case of more than €16 billion.

The brokerage expects Equans to deliver 10% annual EPS upgrades for Bouygues, lifting group long-term earnings. Forecast changes include higher operating free cash flow, supported by improved margin assumptions and lower capital expenditure ratios.

J.P. Morgan’s revised Equans model now assumes a 2027 EBIT margin of 5.5%, above management’s 5% target, and rising further over the long term.

Alongside the Equans re-rating, J.P. Morgan highlighted possible French telecom consolidation as another upside catalyst. 

While its estimates exclude any benefits from such deals, the analysts said Bouygues would be a major beneficiary if SFR is restructured or sold at a reduced valuation. The telecom unit makes up about a third of Bouygues’ sum-of-the-parts valuation.

J.P. Morgan added that Bouygues trades at a discount to peers, with 2026 estimates showing 9.9x P/E versus the sector’s 13x, and an EV/EBITDA of 4.3x compared with 5.4x.

 The analysts argued that an Equans margin upgrade and telecom consolidation could accelerate a re-rating of the shares.