Bernstein has raised its recommendation on Heidelberg Materials to "outperform" from "market-perform," assigning a price target of €230 per share after the cement maker’s stock plunged roughly 20% over a month amid market concern about potential alterations to the European Union’s carbon trading regime.
The research note, published on Feb. 27, followed Heidelberg shares trading at €190 on Feb. 26. At that price the company’s market capitalisation was €33.5 billion and its enterprise value was €40.4 billion.
Bernstein’s €230 target corresponds to about 21% upside from the quoted trading level and derives from a discounted cash flow model. The broker disclosed the valuation inputs: a weighted average cost of capital of 10.3%, a risk-free rate of 2.7%, an equity risk premium of 8.9% and a terminal growth rate of 2.75%.
Analyst Pujarini Ghosh told clients the recent sell-off - which accelerated after a Jan. 27 peak - appears to have factored in a carbon-price decline of roughly €65 per tonne. Bernstein described that implied fall, which it equated to about 80% of the price in effect when the regulatory concern first emerged, as excessive.
On timing for any EU Emissions Trading System policy change, the brokerage emphasised that amendments would need to clear the European Parliament and said implementation would not be immediate. Bernstein noted such changes could extend to late 2027 or early 2028, and that retrospective adjustments before 2030 were unlikely.
The note also recorded other regulatory developments already in force: the Carbon Border Adjustment Mechanism took effect on Jan. 1, 2026, and the planned removal of 2.5% of free ETS allowances will proceed in 2026.
At Heidelberg’s FY25 results call, the group’s chief executive characterised the prospect of the EU ETS being eliminated as rather slim.
Bernstein trimmed its forecast for Heidelberg’s earnings per share to reflect updated volume and currency assumptions. The broker reduced its 2026 EPS estimate to €12.09 from €12.83 and its 2027 estimate to €13.60 from €15, citing weaker volume assumptions and an approximately 3% foreign-exchange headwind.
Under Bernstein’s revised operating outlook, group sales are projected at €21.98 billion in 2026 and €23.43 billion in 2027. EBITDA is forecast at €4.94 billion and €5.37 billion respectively, implying margins of 22.5% in 2026 and 22.9% in 2027.
Based on current market prices, the stock was trading at 15.7 times Bernstein’s 2026 earnings estimate and 14.0 times its 2027 estimate. Those multiples sit below the brokerage’s target-implied valuations of 19.0 times for 2026 and 16.9 times for 2027.
Bernstein’s review of Heidelberg’s balance sheet concluded there is approximately €10 billion of excess headroom under the company’s present capital plan through 2030. The broker expects net debt to decline from 1.2 times EBITDA in 2025 to around 0.1 times by 2030.
The company’s 2025-2030 capital allocation blueprint, as discussed by Bernstein, includes €7.8 billion in capital expenditure and €5-6 billion each earmarked for bolt-on acquisitions and for dividends and share buybacks.
On the subject of decarbonisation spending, Heidelberg’s CFO said at the FY25 call that a fall in carbon prices into a €30-€50 per tonne band would prompt a reassessment of future decarbonisation investments. That review would cover four carbon capture and storage projects that have recently secured EU funding and could improve the company’s free cash flow if undertaken on revised terms.
Heidelberg’s first operational CCS facility at Brevik, Norway, reached mechanical completion in December and entered final testing. For Brevik the company received roughly 85% in capital expenditure subsidies and does not bear transport and storage costs, reducing the potential for stranded asset exposure. A second CCS project in the United Kingdom has subsidy terms described by management as at least equivalent to Brevik.
The CFO also said equity invested in Brevik is very limited, a factor the note said reduces stranded asset risk. Management reported that demand for the company’s net-zero evoZero cement has not been affected by the ETS speculation, and that pricing discussions with customers remain unchanged.
Regionally, Germany was described as a weak market. Heidelberg holds roughly 30% market share in Germany, where local prices are about 40% lower than in France. The broker highlighted a fractured domestic supplier base in Germany, with smaller producers accounting for about 30% of the market and competing aggressively on price.
India, representing about 4% of group sales, was identified as the most concerning market. The country was characterised as highly unconsolidated with local producers barely breaking even. By contrast, North America and the United Kingdom were singled out as the most attractive markets for pricing power.
On shareholder returns, Heidelberg will start its third tranche of share buybacks, amounting to €450 million and the largest to date, after the annual general meeting in the second quarter. The company has adopted a progressive dividend policy, and Bernstein’s note uses a 2026 dividend-per-share estimate of €3.50.
Key points
- Bernstein upgraded Heidelberg Materials to outperform, setting a €230 price target based on a DCF with a 10.3% WACC and 2.75% terminal growth.
- Analyst view is that the recent sell-off priced in an excessive decline in carbon prices; regulatory changes to the EU ETS would likely take until late 2027 or early 2028 to implement.
- Balance-sheet flexibility and subsidised CCS projects at Brevik reduce stranded-asset risk; management sees no immediate demand impact to evoZero cement product pricing.
Risks and uncertainties
- Regulatory risk - Potential changes to the EU Emissions Trading System remain uncertain and could influence carbon pricing and decarbonisation economics for cement producers.
- Market risk - Germany’s weak pricing environment and aggressive competition from smaller producers may pressure regional margins and volumes.
- Project and execution risk - Future decarbonisation investments depend on carbon-price levels and subsidy terms; reassessments could alter capital spending and free-cash-flow outcomes.