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Investing.com -- Goldman Sachs has initiated coverage on Swiss construction chemicals firm Sika (SIX:SIKA) with a “buy” rating and a 12-month price target of CHF280, implying a 31% upside from the June 16 closing price of CHF214.
The analysts expect a recovery in earnings growth, underpinned by organic expansion, margin gains, and continued M&A activity.
Goldman Sachs says Sika is positioned to return to above-peer growth levels beginning in 2026.
After a flat top-line performance in 2024, organic growth is forecast to improve to 5% in both 2026 and 2027.
This is supported by record patent activity, a 72% increase in production capex, and accelerating new product sales.
Sika’s market share in construction chemicals stands at 11%. The company generated CHF11.76 billion in revenue in 2024 and is projected to reach CHF13.31 billion by 2027.
EBIT is forecast to grow from CHF1.71 billion to CHF2.21 billion over the same period. EPS is expected to rise from CHF7.76 in 2024 to CHF10.26 in 2027, reflecting a compound annual growth rate in the low double digits.
Free cash flow yield is forecast to increase from 2.8% to 4.5%, while dividend yield is set to climb from 1.4% to 2.2%.
Goldman Sachs views the current valuation as attractive, with Sika trading at a 22% discount to its five-year average P/E.
The price target is based on a 30x P/E multiple applied to a weighted average of FY26 and FY27 EPS.
That multiple is in line with peer group averages and below historical norms. Sika’s ROCE is projected to improve from 14% in 2024 to 18% by 2028, with long-term incentives for management tied to reaching a 20%-25% range.
Regionally, Sika earns about 45% of revenue in Europe, 35% in the Americas, and 20% in Asia-Pacific. Goldman Sachs expects a constructive European backdrop, with benefits from fiscal expansion in Germany and early signs of recovery in residential construction.
In Asia, flat growth in 2025 reflects exposure to China, though performance is expected to strengthen in 2026 amid improving trends in Southeast Asia and India.
M&A is projected to add 2% to annual revenues through bolt-on deals, with synergies from the MBCC acquisition expected to exceed the previous Parex deal’s 18% synergy realization. Net debt to EBITDA is forecast to decline from 2.0x in 2024 to 1.2x in 2027.