Kingspan: Tightening Energy Efficiency Requirements Offer Earnings Tailwind, but Shares Expensive

We initiative coverage of Kingspan Group with a EUR 61 fair value estimate and no economic moat rating. As a global leader in insulation products and systems, we think Kingspan is ideally positioned to benefit from the secular tailwind offered by built environment energy efficiency standards that are on the rise. Indeed, the reduction of carbon emissions emanating from the built environment is a key element of the ongoing decarbonization of the global economy. In turn, tightened operational carbon emission requirements for newly constructed buildings offer Kingspan a significant growth opportunity given that higher levels of thermal insulation are key to improving the energy efficiency of the built environment. While we think this will drive strong earnings growth over the medium term, Kingspan shares screen expensively and trade at a 27% premium to our valuation. We also assign Kingspan a High Morningstar Uncertainty Rating—owing to its exposure to volatile construction end markets—and a Standard Morningstar Capital Allocation Rating.