Geberit’s Q3 Results Disappoint, but Long-Term Thesis Remains Intact; Shares Offer Compelling Upside

Wide-moat Geberit reported a disappointing set of third-quarter results which came in below company-compiled consensus. Destocking at wholesalers who had prebought inventories during previous quarters, in anticipation of significant price increases by Geberit, and the rapid increase in energy costs were the primary causes behind the weak print. However, we view these factors, which contributed to EBITDA declining 23% or 14% in constant currency, as temporary rather than structural and should not take detract from Geberit’s quality or investment case. In fact, our positive takeaway is that Geberit’s wide moat and strong pricing power remain firmly intact, evidenced by its ability to fully compensate 16% raw material inflation through higher prices. We maintain our CHF 505 fair value estimate and believe shares offer compelling upside for long-term investors.