J.P. Morgan upgrades Kingspan on data-centre demand, earnings momentum

In a note issued Wednesday, J.P. Morgan raised its rating on Kingspan Group to 'Overweight' from 'Neutral,' pointing to robust earnings momentum driven by the building-materials company's data-centre exposure; order intake for data solutions within its Advnsys unit has roughly quadrupled.

The bank lifted its December 2027 price target to €130 from €95, applying a 14.6 times multiple to its forecast adjusted EBITDA for 2027.

Analysts argue that this momentum is not yet fully priced in, with shares trading at roughly 13 times forward 12-month EV/EBITDA—about 7% below their historical average.

At the group level, Kingspan trades at a 23% discount to its European Capital Goods peers, although J.P. Morgan cautions that the comparison is not 'clean' due to differing business mixes among the peer set.

The broker increased its 2027 adjusted EPS estimate by 10.7% to €5.54 from €5.01.

J.P. Morgan now projects 2027 revenue of €11.64 billion, up 15.9% year-on-year, adjusted EBITDA of €1.78 billion, up 26.8%, and an EBITDA margin of 15.3% versus 13.9% in 2026.

The bank sees adjusted EV/EBITDA declining to 11.7 times in 2027 from 15.2 times in 2026, with adjusted P/E dropping to 19.0 times from 25.1 times over the same span.

J.P. Morgan employed three sum-of-the-parts valuation methods. The first implies Advnsys is valued at 13.8 times 2027 EV/EBITDA, a 15% discount to data-centre-exposed peers, assuming the Insulated Building Envelope (IBE) unit trades at 10.6 times.

The second approach values Insulated Building Envelope at 9.4 times—a 13% discount to the Lightside sub-sector—assuming Advnsys trades at 16 times.

The third, with Advnsys at 18 times and Insulated Building Envelope at 13.9 times, points to a fair value of €138 per share, implying roughly 30% upside.

Kingspan is scheduled to hold a Capital Markets Day on November 10 in Oklahoma, centered on its U.S. roofing strategy and a goal of capturing 15% of the commercial flat roof market.

According to J.P. Morgan, execution there, although modest in the near term, could represent a substantial upside that the market has yet to fully recognize.

The broker argues that sustained inflation positions Kingspan as a preferred investment, pointing to tariffs, the Carbon Border Adjustment Mechanism and climbing EU Allowance prices as structural factors that should keep steel costs elevated.

Regarding mounting U.S. resistance to data centre development, J.P. Morgan sees minimal near-term effect for Kingspan, citing its strong order pipeline and attractive valuation.

J.P. Morgan also refreshed its model to incorporate the BMC Manufacturing Group acquisition, raising 2027 sales estimates by 5% and 2027 trading profit forecasts by 13%—now roughly 5% above Bloomberg consensus.

Kingspan itself guides to 2027 revenue above €11 billion, EBITDA of €1.78 billion and trading profit of €1.47 billion, including BMC.

Downside risks highlighted by J.P. Morgan include a sharper-than-anticipated macro downturn across Kingspan's core regions, significant volatility in raw materials like MDI and steel, and reduced pricing power.