SocGen downgrades CRH on outperformance, but says equity story still attractive

Societe Generale downgraded its recommendation on building materials group CRH to ‘hold’ from ‘buy’ following the stock’s outperformance.

The bank said CRH’s equity story is still attractive, but after the 31% year-to-date outperformance versus the broader market, the medium-term growth potential is already captured in the share price.

“We still like its value-creating M&A strategy and expect organic growth momentum to continue. But we believe the current stock price already factors in the medium term growth potential.

“In our view, management’s 2016 guidance is easily reachable. We forecast FY16 EBITDA at €3.2bn and expect net debt/EBITDA to be 1.9x at year-end.”

SocGen said the company reported a good set of numbers on Thursday, with earnings before interest, tax, depreciation and amortisation of €1.12bn, slightly ahead of the pre-trading update figure of €1.1bn in July.

The bank noted CRH has been one of the best-performing stocks in the building materials space, gaining 25.3% year-to-date versus the Stoxx Europe 600’s return of -5.7%.

The bank lifted its price target on the stock to 2,700p from 2,430p.

At 1042 BST, CRH shares were down 0.7% to 2,522p.