Kingspan Earnings: Price Competition Amid Still Weak Construction Markets Weighs on Profit Margins

Kingspan’s weak first-half profit margin performance underwhelmed us, with competitive rivalry in well-contested thermal insulation markets contributing to a 60-basis-point weakening in the group’s EBIT-A margin to 10.1%. Kingspan’s first-half profit margin showing struck us as particularly weak given the volume growth and positive sales mix shift enjoyed by its insulated panels business. We think the soft profit margin outcome amid still weak demand in construction markets highlights the highly competitive nature of thermal insulation product markets, underscoring our no moat rating for Kingspan. We’ve lowered our full-year 2024 EBIT-A forecast by 10% to EUR 831 million to reflect the stiffer year-to-date price competition than we’d previously factored. Nonetheless, better-than-anticipated margin progression in Kingspan’s fledgling data and flooring, and roofing and waterproofing segments leads us to nudge our fair value estimate up by 3% to EUR 63. Kingspan shares are down some 2% in early trade, but continue to trade at a hefty 30% premium relative to our revised valuation.