Sika downgraded by J.P. Morgan, Morgan Stanley as China woes hit growth outlook

Investing.com -- Swiss construction chemicals maker Sika AG was hit by back-to-back downgrades from analysts at J.P. Morgan and Morgan Stanley on Tuesday, as both brokerages cited slower earnings growth, reduced guidance, and valuation pressure tied to weakness in China and Europe.

The stock closed at CHF168.95 on Monday, down 31.6% over the past year.

Shares of the Baar-headquartered company were down 4.4% at 08:34 ET (12:34 GMT).

J.P. Morgan cut its rating to “underweight” from “neutral” and slashed its December 2026 price target to CHF160 from CHF183, warning of further downside despite the stock’s recent underperformance. 

The brokerage trimmed its 2025 adjusted EBITDA estimate by 4% to CHF2.13 billion and its EPS forecast to CHF6.97, down from CHF7.58.

“We downgrade Sika to UW with our revised Dec-26 PT of CHF160 implying 5% downside,” analysts said, adding that “we view this premium as unsustainable given the aforementioned lack of operational outperformance and in fact continued earnings disappointment.”

The downgrade followed a third-quarter earnings miss and a reduction in full-year 2025 guidance. 

Sika lowered its medium-term local-currency growth target to 3%-6% from 6%-9%, bringing it in line with Saint-Gobain’s mid-single-digit goal. 

J.P. Morgan noted that Sika’s returns profile trails peers and that its valuation premium of roughly 55% compared with companies such as Kingspan and Rockwool is no longer justified.

The brokerage also highlighted limited details in the firm’s new CHF80-100 million restructuring plan, expected to yield CHF150-200 million in savings, calling the timing “a little too late” given multi-year weakness in China.

Morgan Stanley followed with its own downgrade, cutting Sika to “equal-weight” from “overweight” and dropping its price target to CHF193 from CHF248, a 22% reduction. 

Analyst Cedar Ekblom said the builder materials supplier’s “growth outperformance vs. the wider construction market has waned,” adding that its “new, lowered revenue growth target no longer positions the business as a premium growth play.”

Morgan Stanley reduced its 2026-2027 EPS forecasts by 5%-6%, projecting 2% local-currency growth in 2026, below management’s 3%-6% guidance, and EBITDA margins between 20%-22%. 

The brokerage pointed to a 12% decline in China’s organic sales during the first nine months of 2025, with the Asia-Pacific region down 4% overall. 

“Sika is also actively shrinking its footprint so as to compete only in the higher margin products. This is a positive strategic step in terms of not commoditising its offering and preserving the medium-term value of the brand and business, but is clearly a strong drag on growth into 2026 as the business resets,” the brokerage said. 

Morgan Stanley valued Sika at 16x 2026E EV/EBITDA, calling the multiple “justified by a reset lower in growth.”