Citi on Tuesday upgraded Knorr-Bremse to a buy and lifted its target price to €123 from €116, pointing to an attractive valuation and improving near-term demand dynamics for the German manufacturer of rail and truck braking systems.
The brokerage noted that Knorr-Bremse shares have slipped since a Feb. 20 peak, leaving the stock trading at roughly a 5% discount to the capital goods sector on 2026 estimated EV/EBITA. Citi described that gap as inexpensive for what it considers a high-quality name in the sector.
Margin expectations and cost management
Citi anticipates the group's margin will reach the top end of the company's own guidance this year, pegged at 14.4%. The bank emphasized strong cost management through weaker quarters as an important factor that could produce upside for truck margins in the second half of 2026, with particular upside potential in the United States.
"Near-term we see healthy end-market momentum, especially in the US, and the strong cost management during leaner quarters points in our view to upside surprise potential on truck margins in 2H26," Citi said.
The broker said the truck cycle had previously kept it on the sidelines, but that near-term momentum appears to have shifted. Citi also warned that the macro backdrop is likely to remain volatile.
Potential catalysts
Citi highlighted Knorr-Bremse's Strategy Update, due at second-quarter results, as a possible catalyst. The brokerage said the update should deliver a positive message on structural growth and reiterate conviction on further margin expansion. It added that strong execution coupled with a solid medium-term outlook could help drive a re-rating of the shares.
Impacted sectors
- Capital goods and industrial manufacturing
- Rail and truck original equipment and aftermarket segments
This report reflects Citi's published view and the specific data points and projections identified above. It does not introduce any additional forecasts beyond those stated by the bank.