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Geberit Announces Share Buyback Worth 500 Million Swiss francs; Target Price CHF 625 in Best Case

Geberit, a European leader in the field of sanitary products, said that it will start its new share buyback programme on Thursday, Sept 17 amounting to a maximum purchase value of  500 million Swiss francs or $551 million over a maximum period of two years.

The Swiss multinational group said based on the closing price of Geberit registered shares on 15 September 2020, this currently corresponds to around 950,000 registered shares or 2.6% of the share capital currently entered in the Commercial Register.

The registered shares will be repurchased via a separate trading line on the SIX Swiss Exchange for the purpose of a capital reduction.

Geberit’s shares closed 0.73% higher at CHF 527.40 on Tuesday; however, the stock is down about 3% so far this year.

Geberit stock forecast

Six analysts forecast the average price in 12 months at CHF 506.71 with a high forecast of CHF 625.00 and a low forecast of CHF 435.00. The average price target represents a -3.92% decrease from the last price of CHF 527.40. From those six equity analysts, one rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Geberit had its stock price forecast boosted by Berenberg to CHF 450 from CHF 360 and Baader Helvea upped their target price to CHF 575 from CHF 460

Other equity analysts also recently updated their stock outlook. Morgan Stanley gave a target price of CHF 464 with a high of CHF 595 under a bull-case scenario and CHF 371 under the worst-case scenario. Kepler Cheuvreux raised their price objective to CHF 520 from CHF 510; Barclays increased the price target to CHF 455 from CHF 420 and Jefferies raised their price target to CHF 356 from CHF 350.20.

Analyst views

“Geberit produces and sells bathroom Sanitary Systems and Bathroom Ceramics. It enjoys a strong market presence in its core North European markets which are highly consolidated. This supports a stable cash return yield of 2.8-3.7% (last 6 years). While we expect Geberit can continue to deliver an appealing yield, particularly in the context of the Swiss asset “opportunity set”, we think the shares are very fully valued,” said Cedar Ekblom, equity analyst at Morgan Stanley.

“We see little upside to total shareholder returns due to: 1) limited market share gains in ‘behind the wall’, 2) potential pricing risk over the medium term in ‘in front of the wall’, 3) softer underlying construction spending,” Ekblom added.

Upside and Downside risks

Upside: 1) Stronger than expected construction spending. 2) Accretive M&A. 3) Cost-cutting at the top end of targets. 4) Lower raw material prices- highlighted by Morgan Stanley.

Downside: 1) Weaker than expected construction spending. 2) Dilutive M&A. 3) Higher raw material prices.

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