Broker snap: Upside 'limited' for building material plays

13th Jan 2010 09:08

The European building materials sector has had a strong 12 months and Credit Suisse thinks further upside is limited for the next few months, so cuts its stance to 'market weight' from 'overweight'.'We believe that the sector fairly reflects the prospects for moderate volume and margin improvement in 2010, while the risks of delayed recovery in volumes, a sharp increase in energy costs or a deteriorating pricing environment remain,' it said in a note to clients Wednesday.'That the sector still looks fully valued, even when factoring in our pretty optimistic base scenarios for global growth, is a concern.'Its view on UK-listed players is mixed. Insulation board maker Kingspan is downgraded to 'underperform' from 'neutral' with price target dropped to €4 from €5.4, but it keeps Ireland's CRH as 'outperform' and still sees 23% upside potential to its new €22 price target, cut from €23. The Swiss bank is more upbeat on Travis Perkins, which it upgraded to 'outperform' from 'neutral' with target raised to 972p from 830p as current market forecasts are too bearish.'We expect total sales growth of 8%, in contrast to the consensus forecast for 0% growth. In addition to our organic volume growth forecast of 3% we expect the group to start capitalising on its robust balance sheet with a moderate amount of acquired growth,' it said.