Buzzi in light with Morgan Stanley promotion, solid fundamentals

(Il Sole 24 Ore Radiocor) - Positive session for Buzzi, which after the initial sprint (the stock had gained almost 3% in the early stages), reduced its gains while remaining in broadly positive territory. Supporting the stock is the fact that Morgan Stanley raised its rating to 'overweight' from 'equal weight' with an improved target price to EUR 53 from EUR 44. In a report on the European construction sector, the investment bank's analysts gave an overall positive assessment of the sector, speaking of "solid fundamentals" ahead of the end of the year. Regarding Buzzi, specifically, Morgan Stanley sees a number of positive catalysts that lend support to the stock: "We see price/cost advantages, with upside potential relative to consensus estimates. Support also comes from exposure to the US, which should benefit from long-term favourable winds in infrastructure and manufacturing spending," say the analysts, noting that "the company also has a strong balance sheet". Moreover,"the shares are trading at a discount, which is historically explained by lagging relative shareholder returns and a less ambitious medium-term decarbonisation target. However, this discount is too wide, in our view, and the shares present an attractive entry opportunity'. In the base scenario outlined by Morgan Stanley, in which the price target is set at EUR 53 per share, 'stable growth in the medium term' is assumed. However, there is also a more optimistic scenario, in which the target price could go as high as EUR 67, and which assumes 'a more solid organic growth outlook, with revenue growth of around 7% in the medium term'.