Overview
Barclays moved Nexans SA up a notch to an "overweight" rating from "equal weight" and raised its price target by 19% to €157 from €132. The broker said the recent sharp fall in the stock has largely reflected concerns around a disrupted high-voltage transmission contract, and that those concerns are now more than accounted for in the share price. The stock reacted to the note, trading higher by more than 6% after the upgrade.
Valuation and price targets
Nexans closed at €122.60 on March 2, which Barclays calculated implies about 28.1% upside to the new €157 target. The bank also published scenario targets, setting a bull case at €177 and a bear case at €116.
Trigger of recent weakness
The downgrade in market sentiment that preceded Barclays' action followed the rescheduling of the GSI offshore cable project. From year-to-date highs, Nexans shares had fallen roughly 17%, a decline Barclays says erased about €1.1 billion from the company’s market capitalisation.
Peer-relative valuation
On a two-year forward EV/EBIT basis, Barclays notes the stock now trades at approximately a 50% discount to the European capital goods index SXNP and at a 45% discount to Italian rival Prysmian. The bank highlights that this is the widest gap versus peers since the COVID pandemic and compares it to a five-year average discount of 23% to Prysmian. "GSI loss is more than priced in, in our view," Barclays' analysts wrote.
GSI backlog and earnings potential
Barclays emphasised that the GSI contract still represents €1.2 billion in backlog value and carries an estimated 25% EBITDA margin, which the bank equates to roughly €300 million in undiscounted EBITDA potential. Management informed Barclays they are tendering for a replacement MI cable project - MI cables constitute 20% of transmission capacity - with a potential award that could be announced in the second quarter. Barclays also noted that all XLPE lines are fully loaded and that Nexans has been fully paid for GSI work already completed.
Updated forecasts
Following its review, Barclays raised group adjusted EBITDA estimates by between 8% and 15% across 2026 to 2028, putting its outlook 4% to 11% ahead of Bloomberg consensus. The broker now forecasts group adjusted EBITDA of €796 million for 2026, €938 million for 2027, and €1.02 billion for 2028. Barclays also observed that consensus sits roughly 11% below the midpoint of Nexans' own 2028 guidance.
On an earnings per share basis, Barclays updated its forecasts to €7.86 in 2026, €10.00 in 2027 and €11.25 in 2028. These replace prior estimates of €6.88, €8.53 and €9.05 respectively.
Business drivers highlighted
The bank singled out the PWR Grid division as being undervalued by the market. Barclays noted Nexans is planning a 50% expansion in grid cable capacity versus 2024 levels by 2028, with new manufacturing facilities planned in Sweden, France and Morocco. The note also points to strong demand pushing prices higher and the existence of a premium for recycled aluminium cables, which represent roughly 30% of Nexans' volume.
European construction signal
While existing guidance from the company embeds no recovery in European construction, Barclays cited permit data showing early signs of improvement: residential permits are reported up 15% on a trailing twelve-month basis in France and up 11% in Germany, according to each country’s statistical authorities as cited by the bank.
Market takeaway
Barclays' move combines a valuation argument with an upward revision to near-term earnings expectations and an emphasis on backlog and capacity-led growth in the grid segment. The bank's central thesis is that the market reaction to the GSI disruption has been stronger than warranted relative to the remaining backlog value, the margin potential tied to that backlog, and the broader capacity and pricing dynamics the company is pursuing.
Key points
- Barclays upgraded Nexans to overweight and raised its price target to €157, citing an overreaction to GSI-related issues.
- The GSI contract retains €1.2 billion of backlog and an estimated €300 million in undiscounted EBITDA potential at a 25% margin.
- Barclays upgraded EBITDA and EPS forecasts for 2026-28 and flagged the PWR Grid division as underappreciated amid planned capacity expansion and stronger pricing.
Risks and uncertainties
- Rescheduling of the GSI offshore project has already prompted a steep de-rating in the stock - the uncertainty around that project is a primary risk to valuation and near-term sentiment.
- The potential award for a replacement MI cable project is not certain - Barclays notes an award could come in the second quarter, but the outcome remains to be decided.
- Barclays' forecasts and relative valuation rests on a recovery in pricing and on successful capacity ramp-up in the PWR Grid division; delays or weaker demand could affect the outlook.
Data points and forecasts in this report are drawn from Barclays' published note and management commentary cited therein.