DAVY VIEW

Kingspan’s valuation is now 25-30% above its five-year average. While rating expansion is also evident in other high-quality European industrials, it does complicate the near-term investment case. We believe further substantive M&A (around €1bn in the next two years) is most likely required to maintain the stock’s momentum. Kingspan has positive form in this regard and we are therefore happy to give it the benefit of the doubt. That said, it clearly adds a layer of risk and uncertainty. One thing we are more certain of is that Kingspan is structurally extremely well positioned for the 2020s. This is especially so in the context of its role in the construction sector’s response to climate change.