First Read: Belimo "EMU construction PMI tracker - overall weak levels,..."

Research evidence excerpt

First Read: Belimo "EMU construction PMI tracker - overall weak levels,..."

osure on non-residential markets. Hence, EMU

12/26E 17.32 17.37 0 17.91

construction PMIs and Belimo's regional sales correlated well historically, typically with a

12/27E 19.40 19.42 0 21.31

lag of five to six months. While we recognize that this relationship recently somewhat 12/28E 20.56 20.63 0 24.10

weakened due to the company's increasing exposure to data centers, we continue to

see construction PMIs as a relevant driver for its European operations, since c83% of the Sebastian Vogel, CFA

group’s revenues (UBSe), and an even higher proportion in Europe, remain unrelated to Analyst

data center construction activities. sebastian.vogel@ubs.com

+41-44 239 90 45

Recent stock market movements are again increasingly aligned with PMIs Patrick Rafaisz, CFA, FRM

AnalystBelimo's share price and EPS have also traditionally demonstrated a significant

patrick.rafaisz@ubs.com

correlation with Eurozone construction PMIs, in our view. Although this relationship also +41-44-239 90 66

weakened as the company expanded its exposure to the data centers, recent

developments suggest the correlation strengthened again especially considering the

company's share price and PMIs. However, we also expect that consensus EPS forecasts

remain more under the impression of data centers.

Valuation: DCF-derived PT of CHF500/conclusion

Our PT of CHF500 is DCF-derived, using long-term estimates for terminal sales growth/

WACC at 2.5%/7.0%, respectively. We rate Belimo Sell. In our view, the continued weak

absolute PMIs, as well as the ongoing negative momentum, suggest further demand

headwinds for Belimo's non-data center activities in Europe in the coming months.