What’s behind UBS’ Belimo upgrade to Neutral?

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Investing.com - UBS upgraded Belimo Holding (BS:BEANz) to Neutral from Sell and raised its price target to CHF827 from CHF575, citing expected market share gains in the company’s data center actuator, valve and sensor businesses.

The investment bank now forecasts organic sales growth of around 11% annually for Belimo between fiscal 2026 and 2030, driven by market share expansion in data center-related submarkets. UBS said these gains should offset anticipated moderation in underlying data center capacity build-out.

The firm expects Belimo’s data center sales to grow around 20% annually during the period, while non-data center construction business, which represents 76-77% of group sales, is forecast to grow around 9% annually.

UBS projects Belimo’s adjusted EBIT margin will expand to 25.6% by fiscal 2030 from 20.9% in fiscal 2025. The firm attributed the expected margin improvement to operating leverage from sales growth and higher operating margins in the data center business compared to construction-related operations.

The bank raised its earnings per share estimates for fiscal 2027-2028 by 3-14% to reflect the revised forecasts. UBS maintained its terminal sales growth assumption at 2.5% and weighted average cost of capital at 7.0%, while raising its terminal EBIT margin assumption to 24.8% from 23.0%.

UBS said Belimo’s current stock price already discounts much of the firm’s more positive expectations based on a reverse discounted cash flow valuation approach.

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