UBS downgrades Buzzi due to challenging market conditions and weak prices

(Il Sole 24 Ore Radiocor) - Buzzi is weighing on the Milan stock market following a downgrade by UBS, which has recommended selling the share and set a target price of 34 euros – a significant cut from the previous 52 euros. The shares are the worst performers on the FTSE MIB index after falling to 35.53, a new low since the start of 2025. According to UBS analysts, the company’s performance is being weighed down, on the one hand, by a challenging market and, on the other, by weak prices, with growing pressure from cement imports into the US and rising CO₂-related costs in Europe. The broker has downgraded its rating on the share to ‘Sell’ and reduced its target price, after revising its earnings per share forecasts for 2027–2030 downwards by 10–25 per cent.

The main source of pressure comes from the United States, with the US cement business accounting for around 45 per cent of Buzzi’s EBITDA. In particular, Buzzi is feeling the impact of its exposure to the southern regions – estimated at around 50% by UBS – where the outlook is weaker: demand is weaker here and “we believe a further weakening is likely in 2027, driven by a slowdown in residential construction that far outweighs the benefits deriving from growth in data centres and infrastructure”, says UBS.

Added to this is increased competition from imported cement. Its share of domestic sales in the Southern states has risen from 10–12 per cent prior to 2020 to over 20 per cent today, with Texas exceeding 30 per cent. The price differential with locally produced cement has reached around 50 per cent, compared with 20–30 per cent 10–15 years ago. In the absence of a strong recovery in demand, the broker therefore considers price growth unlikely. EBITDA estimates for the US segment have been reduced by 6–12 per cent for 2026–2027.

On the European front, however, the cost of CO₂ emission allowances is a burden, which, according to analysts, limits Buzzi’s operating leverage in the event of a recovery in the construction sector, particularly in Germany. Overall, estimates have been revised downwards from an EBITDA slightly above the consensus to a level 3–12 per cent below expectations through to 2030, with a profit growth profile among the weakest in the sector. The new target price, based on a DCF model, primarily reflects the downward revision of EBITDA estimates, which have been cut by over 20% for the more distant financial years. At €34, Buzzi would be trading at around 7.5 times the 2027 price-to-earnings ratio, compared with 7–16 times for its peers, and at a free cash flow yield of around 7 per cent.