We Aren’t Concerned by Geberit’s Lower Profit in Q1; High-Quality Business Trading at a Fair Price

Wide-moat Geberit was able to implement larger price increases than usual to combat inflation without having a significant impact on demand in the first quarter, highlighting the group’s impressive pricing power. First-quarter revenue grew 13% year over year in local currency with an equal contribution from price and volume growth. However, price increases were not enough to combat significant raw material and energy inflation of 24% and 94%, respectively. The above-mentioned factors along with unfavorable currency movements led to a decrease in operating profit of 5% year over year. Further price increases have been implemented in April and an extraordinary price increase will be implemented in July as raw material inflation persists. Geberit’s ability to mitigate inflation does not come as a surprise to us and we reiterate our CHF 505 fair value estimate. Shares have fallen 30% year to date and are trading in fair value territory.