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Investing.com -- J.P. Morgan has upgraded Genuit Group (LON:GENG) to “overweight” from “neutral” and increased its price target to 490p from 450p, updating its valuation to December 2026.
The upgrade follows a 24% de-rating in Genuit’s share price since October 2024, positioning it near a decade-wide discount to sector peers.
The brokerage identifies improved risk/reward dynamics as construction markets stabilize, particularly in new-build residential, which accounts for 34% of group revenue.
Operational leverage is cited as the primary margin driver, with volumes down 20–25% since 2019.
The group’s FY24 adjusted operating margin of 16.4% is roughly 200 basis points below normalized levels.
J.P. Morgan projects that a volume recovery, even partial, could significantly improve margins.
In a scenario where 2019 volume levels return, margins could exceed 19.5%, with a 33% potential upside to 2027 forecasts. The brokerage maintains that Genuit’s over 20% margin target is achievable.
Revenue is forecast to rise from £561 million in FY24 to £601 million in FY25 and £633 million in FY26.
Adjusted EBITDA is expected to grow from £119 million in FY24 to £126 million in FY25 and £137 million in FY26.
Adjusted EBIT is projected at £81 million in FY25 and £92 million in FY26. Earnings per share are forecast at 25.90p in FY25 and 29.06p in FY26.
EBITDA margins are set to improve from 20.9% to 21.6% over the same period. J.P. Morgan’s EBITA forecasts are 1% above consensus for FY25 and 3% for FY26.
Genuit’s increased focus on sustainability-related solutions is expected to drive outperformance versus the U.K. construction sector.
Historically growing 0–1% above U.K. construction output, the company now targets 2–4% outperformance through the cycle.
This is supported by regulatory initiatives such as the Future Homes Standard and Ofwat’s AMP8.
M&A remains a growth lever. Since its IPO in 2014, Genuit has completed 13 acquisitions, contributing roughly 35% of current revenue.
The group could deploy 7–14% of its market capitalization for further acquisitions if net debt/EBITDA increases to 1.5–2.0x.
Valuation is based on an 11.5x EV/EBITA multiple applied to 2027 forecasts using a reverse-DCF model.
Genuit currently trades at a 15% discount to its 10-year EV/EBIT average and a 32% discount to other residential construction-exposed capital goods peers, near its widest historical spread.
J.P. Morgan sees scope for re-rating as the group transitions from a traditional piping manufacturer to a diversified provider of water and climate management solutions.