European building materials equities have fallen sharply since late February, declining roughly 10-20% while the wider market has fallen about 7%. The sector rout has been attributed to energy inflation, rising bond yields and uncertainty over CO2 regulation, which have unsettled investors.
Goldman Sachs frames the recent weakness as an opportunity to acquire shares in companies that combine strong pricing capability, exposure to infrastructure work and disciplined cost control. The firm assigns Buy ratings to four names, each supported by specific valuation and operational arguments. Below are the firms and Goldman Sachs' rationale for their respective targets and upside estimates.
Sika - target CHF 200, roughly 55% upside
Goldman highlights Sika as the highest-upside pick on its list. The bank notes that Sika's current valuation is about 35% below its 10-year average price-to-earnings ratio, and judges the recent selloff to be excessive relative to the company's fundamentals. Raw material inflation remains a watch item: Goldman states that about two-thirds of Sika's cost of goods sold are derived from oil-based inputs. However, peers such as H.B. Fuller have already implemented price increases in excess of 10%, indicating a path for Sika to recover margins. Goldman also points to Sika's roughly 30% exposure to infrastructure end-markets, which it views as a buffer against weakness in residential demand that has weighed on some other lighter-end peers.
Heidelberg Materials - target 250, roughly 45% upside
Goldman describes Heidelberg Materials as its most prominent risk/reward call. The bank's valuation work suggests that, when Heidelberg's North American assets are valued at peer multiples, the remaining European operations trade at around 6-7x EV/EBIT. That is a material discount versus Holcim, which trades at 13x, and versus European peers averaging about 9x. Goldman points to healthy cement pricing dynamics, an ongoing cost savings program and resilient infrastructure exposure as supports for the investment case. The report flags the primary downside risk as a European construction cycle that proves weaker than expected.
Rockwool - target DKK 239, roughly 45% upside
Rockwool is characterized as energy-intensive, but with a structural edge: roughly half of its energy mix comes from metallurgical coal (met coal), which Goldman notes has remained broadly flat since the onset of the current conflict, in contrast to gas and electricity prices that have risen about 90% and 40%, respectively. Goldman identifies new capacity additions as the main driver of future earnings growth and highlights that the stock trades at a marked valuation discount to its historical norms. The bank views the Russia-related overhang as largely priced in, leaving scope for a re-rating as incremental capacity starts to contribute.
Cemex - target $14, roughly 35% upside
Cemex is presented as the most "self-help" oriented thesis among the quartet. Goldman references Cemex's $400 million Project Cutting Edge cost-cutting initiative as providing an earnings floor. The firm also points to trough volumes in Mexico and robust US infrastructure demand as sources of possible top-line recovery. On energy exposure, Goldman states that about half of production energy is covered by agreements and that diesel is 75% hedged through contracts, which it views as manageable. At roughly 7x EV/EBITDA, Goldman says the stock is trading in line with its 20-year historical average and could re-rate higher if execution on initiatives holds.
Goldman Sachs' four Buy-rated selections center on the interplay between valuation dislocation, operational levers and exposure to infrastructure work. The bank's thesis rests on pricing power and targeted cost programs offsetting the headwinds from raw material and energy inflation, while valuation gaps versus peers open the possibility of upside should markets re-rate the sector.