Exane BNP Paribas (OTC:BNPQY) began coverage on SEB SA (SK:FP), assigning the stock an Outperform rating and setting a price target of EUR 125.00. The firm highlighted the stock's year-to-date decline of 17%, noting that it is currently trading at the lower end of its historical valuation range, which presents a favorable risk/reward scenario for investors.
The firm's positive outlook is based on several key factors. Firstly, SEB's strong fundamentals and leading market positions were emphasized. Additionally, the firm pointed to the company's earnings growth prospects, projecting a compound annual growth rate (CAGR) of approximately 13% for earnings per share (EPS) from fiscal year 2023 to 2026.
Another point of interest for Exane BNP Paribas is SEB's strategic expansion into the professional market, which is expected to have higher growth and margins. Moreover, SEB's robust presence in China, where it generates over 25% of its sales, was underscored as a significant strength.
From a valuation standpoint, the stock's appeal is further bolstered by its current trading metrics. SEB shares are trading at less than 10 times the forecasted price-to-earnings (P/E) for fiscal year 2025, with a free cash flow (FCF) yield of around 9% and an enterprise value to earnings before interest and taxes (EV/EBIT) multiple of approximately 8.5 times.
Additionally, the firm pointed out that SEB's stub valuation, which excludes its China operations, is also at attractively low levels, at roughly 5 times P/E.
The firm's analysis concludes with the assertion that their EUR 125.00 price target implies a potential upside of over 30% from the stock's current levels, indicating a strong vote of confidence in SEB SA's market performance potential.
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