First Read: Zehnder Group AG "Feedback from call on new organizational..."

Research evidence excerpt

First Read: Zehnder Group AG "Feedback from call on new organizational..."

Forecast returns

Forecast price appreciation 33.3%

Forecast dividend yield 2.9%

Forecast stock return 36.3%

Market return assumption 5.2%

Forecast excess return 31.1%

Company Description

Zehnder Group, headquartered in Gränichen, Switzerland, is a leading manufacturer of

premium indoor climate solutions ranging from ventilation and cooling systems to heating

solutions such as radiators. The company has production plants located in Europe, China and

North America. FY24 revenues were generated in EMEA (80%), North America (16%) and

APAC (4%). Of the company's two divisions, the Ventilation division accounted for c60% of

revenues and c90% of EBIT while the Radiator division accounted for the remainder. Zehnder

employs around 3,500 employees globally.

Valuation Method and Risk Statement

Our price target for Zehnder is based on a DCF approach (2.0% terminal growth, 9.3%

WACC), cross-checked with relative valuation multiples. Building material and construction

companies like Zehnder are by their nature exposed to national building cycles which are

influenced, in our view, by the level of interest rates, the rate of growth of GDP, employment

growth, population growth and the general conditions of buildings and infrastructure (both

public and private). Besides, the growth in low-energy standard housing increases the need

for healthy indoor climate and thus ventilation, thus sales are also driven by regulatory

requirements. Zehnder's sales are also sensitive to selling prices, which can vary as capacity

and demand levels fluctuate. Costs can be impacted by energy costs, labor costs and other

raw material costs (mostly steel, aluminum, electrical components), as well as planning and