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Investing.com -- European cement stocks have seen a sharp re-rating this year, but JPMorgan believes there is still more upside ahead—particularly for names with strong decarbonization strategies.
The sector has re-rated by roughly 70% year-to-date on an EV/EBITDA basis, yet the Wall Street firm argues the valuation gap with U.S. peers could narrow further.
In a recent note to clients, JPMorgan analysts point to more favorable prospects for Europe. They assess growth outlooks, industry fundamentals—especially around import risks and pricing—and the potential for product differentiation through decarbonization efforts.
“Despite the strong re-rating journey so far for Europe, we still see better prospects ahead for Europe and thus scope for further re-rating potential to narrow the valuation gap versus the U.S. cement industry,” the report says.
JPMorgan argues that the European market is better positioned to benefit from sustainability-led transformation.
Heidelberg (ETR:HDDG) Materials and Holcim (SIX:HOLN) are highlighted as the bank’s top picks to play this theme. Both companies are rated Overweight, and their decarbonization efforts are viewed as a key competitive advantage.
The cement industry accounts for 7–8% of global greenhouse gas emissions—about 2.6 gigatonnes annually—making decarbonization a critical challenge.
Cement production is particularly hard to abate, as it relies on high-temperature processes and releases CO2 during clinker production, which alone accounts for over half of the sector’s emissions.
With global cement demand set to rise, especially in the Global South, the pressure to cut emissions is mounting. Many producers and users now have net-zero targets, including Holcim and Heidelberg Materials.
Heidelberg’s Brevik plant in Norway, part of the Longship project, is the world’s first cement facility equipped with carbon capture and storage (CCS). It represents part of the Norwegian government’s Longship project, aimed at demonstrating the full chain of CO2 capture, transport, and safe storage from industrial sources.