UBS Global Research has moved Gerresheimer AG (ETR:GXIG) to a "sell" rating from "neutral" and slashed its 12-month price target to €12.90 from €29, a downgrade driven by concerns over the company's leverage profile, reduced growth assumptions and downward revisions to margin forecasts. The announcement coincided with a roughly 4% decline in the company's shares on Tuesday.
The brokerage firm stated that Gerresheimer's leverage, measured on an ex-leases basis, was about 5x at the end of November. UBS expects leverage to be around 4.9x at the end of FY25E, which stands above the prior covenant threshold of 4.25x. The bank also said it lacks visibility on the revised covenant level following the debt renegotiation in August 2025 and is uncertain about the covenant's duration.
As part of its FY25 and FY26 announcements, Gerresheimer revealed it has launched sale processes for two businesses - Centor and Moulded Glass - intended to support the company's deleveraging effort. UBS characterised Centor as "a potentially attractive asset but a sale would dilute margins," while noting Moulded Glass appears more difficult to divest amid weak end markets.
UBS reduced its mid-term projections and raised its discount rate, which led to the lower price target. The broker's discounted cash flow valuation now assumes a weighted average cost of capital of 10% versus 9.6% previously, a terminal EBITDA margin lowered to 21% from 22%, and an unchanged terminal growth rate of 1.8%. UBS noted it trimmed adjusted EBITDA margin forecasts by 2.0 percentage points for FY25, 1.3 percentage points for FY26, 0.2 percentage points for FY27 and 0.3 percentage points for FY28. It also lowered FY27 and FY28 organic growth estimates by 0.7 percentage points and 1.5 percentage points, respectively.
The brokerage now models FY25 revenue at €2.28 billion, FY26 at €2.29 billion and FY27 at €2.34 billion. Adjusted EBITDA is forecast at €379 million for FY25 and €412 million for FY26, which imply margins of 16.6% and 18.0%, respectively.
UBS projects Gerresheimer's net debt to EBITDA at 5.5x in FY25E. Net debt is estimated at €2.07 billion in FY25E and €2.04 billion in FY26E. The bank also estimates cumulative cash burn of close to €290 million over 2021-25E.
According to UBS, the updated forecasts reduce enterprise value by roughly 18% and cut equity value by about 56%, driven largely by the role of net debt, which represents approximately 80% of enterprise value in the broker's model. The discounted cash flow outcome yields a fair value of €12.9 per share, versus €29.3 in UBS's prior valuation.
Market data show Gerresheimer shares closed at €20.44 on Feb. 20. The stock trades within a 52-week range of €81.40 to €18.67 and the company had a market capitalisation of €0.71 billion at that close.
Analysis context
This repricing by UBS reflects a simultaneous reassessment of Gerresheimer's operational trajectory and its balance-sheet risk. The firm's decision to pursue asset sales signals management attention to leverage, but UBS emphasises that such disposals could have mixed effects - they may reduce indebtedness while also diluting margins depending on which assets are sold and at what terms.
UBS's move to a higher discount rate and lower terminal margin underlines the broker's view of increased uncertainty around cash flows and returns, and the downgrades across adjusted EBITDA and organic growth further lower expectations for near- to mid-term performance.
Key statistics reiterated by UBS
- New 12-month price target: €12.90 (previously €29; prior valuation noted at €29.3)
- Weighted average cost of capital used in DCF: 10% (previously 9.6%)
- Terminal EBITDA margin: 21% (from 22%); terminal growth: 1.8% (unchanged)
- FY25 revenue forecast: €2.28 billion; FY26: €2.29 billion; FY27: €2.34 billion
- Adjusted EBITDA: €379 million (FY25); €412 million (FY26) - margins 16.6% and 18.0%
- Net debt estimates: €2.07 billion (FY25E), €2.04 billion (FY26E); net debt/EBITDA: 5.5x (FY25E)
- Cumulative cash burn estimated near €290 million over 2021-25E