On Wednesday, Goldman Sachs (NYSE:GS) reinstated coverage on Prysmian SpA (PRY:IM) (OTC: PRYMY), issuing a Buy rating with a price target of EUR70.00. The firm highlighted Prysmian's strengthened position in the U.S. low voltage (LV) market and its growing exposure to datacenters as key factors for the positive outlook.
The reinstatement follows Prysmian's acquisition of Encore Wire (NASDAQ:WIRE), which has significantly increased the company's market share. Prysmian now commands approximately 45%-50% of the U.S. LV market, which constitutes around 30% of its sales. Southwire, the main competitor, holds another 30%, marking a high level of market consolidation.
Goldman Sachs noted the substantial margin growth in the Electrification segment from 2019 to 2023, attributing it partly to the consolidation after Prysmian's merger with General Cable. Despite a challenging construction environment, the company is expected to maintain its current margin levels. The analyst firm pointed out that tighter copper and aluminum markets could act as barriers to entry for smaller competitors, further benefiting Prysmian.
The firm also underscored Prysmian's increased business with datacenters, which now represents 9% of the company's LV revenues. This sector is anticipated to support the maintenance of higher margins in Electrification.
Looking ahead, Goldman Sachs anticipates a guidance upgrade for the fiscal year 2024 during Prysmian's second-quarter results, set to be announced on July 27, 2024. Additionally, the firm expects further revisions to the 2024-2025 guidance at Prysmian's Capital Markets Day in October 2024.
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