We lowered our forecasts for the coming years but decided to upgrade our rating from Hold to Accumulate given the very attractive valuation,which we believe offset for the economic uncertainties and antitrust investigations. We stick to our € 7.5 price target.
We lowered our forecasts for 2012 given the increased economic uncertainty. We lower our FY12 sales forecast by 6% and now forecast a 5% drop y/y to € 1.31bn. We lowered our FY12 REBITDA forecast by 9% to € 87.2m, which still represents an increase of 1% vs. our 2011 forecast of € 86.4m. The biggest reason for the expected increase in profitability is that we expect slowing volumes to lead to lower raw materials prices. We remind that Recticel has been able in the past to pass declining raw materials prices only with some delay to customers, thereby improving profitability. As an example, revenue declined by 18% in 2009 whereas REBITDA increased by as much as 23%. As a result of the changes to our model, EPS forecasts decline from € 0.90 to € 0.77 for 2012 and from € 1.20 to € 1.06 for 2013.
Experience from the past shows that softening end markets are not always leading to negative profitability for Recticel (given the dampening impact lower demand may have on rawmat prices). Despite the lack of earnings visibility in the short run and the continuing uncertainty around the antitrust investigations, we believe current valuationis too cheap to ignore. Recticel is trading at 6.0x P/E12E (based on our new, lowered forecasts) and 3.4x EV/REBITDA12E. Even if we were to include a huge antitrust fine of 5% of group revenue (or roughly € 65m) then our EV/REBITDA12E multiple would increase by roughly 0.7x to 4.1x. We upgrade our rating from Hold to Accumulate while sticking to our € 7.5 target price.