On Wednesday, BofA Securities adjusted its stance on Fluidra SA (BME:FLUI) (FDR:SM), downgrading the stock from Neutral to Underperform. The firm also revised its price target downward to €21.00 from the previous €24.00. The revision reflects a cautious outlook on the company's operational efficiency recovery and market demand.
Fluidra, a company known for its strong aftermarket exposure, has seen a 13% re-rating year-to-date, even amidst a challenging demand environment. This optimism is based on market expectations for an improved performance by 2025. However, BofA Securities suggests that the consensus may be overly optimistic about the speed at which the original equipment (OE) market will recover post-downturn.
The analyst noted that between 2020 and 2022, there was a significant overbuild of pools compared to historical averages, which might hinder a rapid resurgence in demand. Market estimates currently imply a 9% growth in new pool installations by 2025, whereas BofA forecasts a 1% decline. The firm's projections are approximately three percentage points below the consensus for organic growth in 2025.
As a result of these assessments, BofA Securities has reduced its adjusted EBITA estimates for Fluidra by 3-6%. The new price target of €21.00 is set at a 10% premium to the firm's through-cycle EV/EBITA multiple of 11x. This valuation is considered fair by BofA, given their assessment that the OE market is likely at its cyclical trough.
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