UBS on Wednesday moved Kingspan Group to a Buy rating from Neutral and lifted its price target to €130 from €80, arguing that the market does not fully reflect the contribution from the company’s datacentre business. The bank says this division, housed within Kingspan’s Advanced Building Systems segment (ADVNSYS), is accelerating rapidly and will account for a far larger portion of group earnings than previously assumed.
UBS projects the ADVNSYS business will expand its share of group earnings before interest, tax and amortization (EBITA) from about 10% in 2025 to approximately 35% in 2027 - a pace of growth the analysts described as unprecedented in the sector. In response, UBS raised its 2027-2029 earnings-per-share estimates by 17% to 29%, placing those forecasts 5% to 10% above the Street consensus.
The bank noted that the recent roughly 20% move in the stock price still implies little re-rating relative to the upgraded fundamentals, leaving Kingspan trading at the lower end of its historical valuation range despite the shift in business mix.
Jefferies reached a similar conclusion a day earlier, upgrading Kingspan to Buy from Hold on Tuesday and increasing its price target to €140 from €103.90. Jefferies projected 2027 trading profit of €1.50 billion, which it said is 12.5% above the Visible Alpha consensus average of €1.33 billion. The firm attributed its higher target both to faster growth in ADVNSYS and to Kingspan’s recently announced acquisition of BMC.
UBS’s €130 price target is based on a discounted cash flow model that uses a weighted average cost of capital (WACC) of 7.5% and a terminal growth rate of 2%, which the bank left unchanged from its prior model. At that target, UBS calculates shares would trade at about 23 times projected 2027 price-to-earnings - at the top end of Kingspan’s long-term P/E range of 17 to 23 - and around 14 times enterprise value/EBITDA versus a historical range of 11 to 16 times.
As part of its research, UBS included a primer on ADVNSYS and the BMC acquisition, addressing product lines, competition, technological risks and the strategic fit for Kingspan. The bank said it also considered the possibility that the company is simply benefiting from a cyclical datacentre wave that could reverse.
UBS expects ADVNSYS EBITA margins to expand from roughly 11% in 2025 to about 17% to 18% within two to three years. Those margin levels, UBS said, are closer to datacentre equipment peers that trade at 20% to 80% premiums to Kingspan today.
Using the current share price and assuming Kingspan’s Insulated Building Envelope segment trades at its historic average group multiples, UBS derived an implied ADVNSYS EV/EBITDA multiple of about 10 to 11 times. The bank characterized that as the very low end of the valuation range across a group of 16 datacentre equipment peers it reviewed.
The UBS upgrade follows a wave of more positive analyst activity on the stock, with both UBS and Jefferies emphasizing the growing role of ADVNSYS and the strategic implications of the BMC purchase. Their revised forecasts and higher price targets reflect a reassessment of Kingspan’s profit mix and margin trajectory driven by datacentre-focused products.
Summary
UBS upgraded Kingspan to Buy and raised its price target to €130 after concluding the company’s datacentre unit will contribute a much larger share of group EBITA by 2027. The bank lifted its EPS forecasts for 2027-2029 and highlighted improving margins at ADVNSYS. Jefferies issued a similar upgrade a day earlier and raised its price target to €140, citing the same drivers and the BMC acquisition.
Key points
- UBS upgraded Kingspan to Buy and raised its target to €130 from €80, using a DCF model with a 7.5% WACC and 2% terminal growth rate.
- UBS expects ADVNSYS to grow from ~10% of group EBITA in 2025 to ~35% in 2027 and forecasts EBITA margins to rise from ~11% to 17%-18% within two to three years.
- Jefferies also upgraded Kingspan and set a €140 price target, forecasting 2027 trading profit of €1.50 billion versus Visible Alpha consensus of €1.33 billion; it cited ADVNSYS growth and the BMC acquisition.
Risks and uncertainties
- Pricing and valuation risk - UBS notes the stock’s recent move still leaves Kingspan trading at the lower end of its historical multiple range, and the market may re-rate differently if expectations change.
- Operational and market risk - UBS explicitly considered the possibility that Kingspan is benefiting from a datacentre cycle that could reverse, which would reduce the anticipated contribution from ADVNSYS.
- Execution risk - the anticipated margin expansion at ADVNSYS and benefits from the BMC acquisition depend on integration and product performance to reach the levels UBS projects.