Masterplast's situation has improved, but the turnaround in the construction industry is still pending
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Barely half a year after this year’s French budget was passed, the wrangling over the 2027 budget is about to begin, but that’s not all, because France will also hold a presidential election next spring. During the first public presidential debate, some of the radical candidates put forward ideas that were, at times, unconventional. Although the presidential election in late April still seems far off, based on the latest polls, if no candidate secures enough votes and a runoff is held, it cannot be ruled out that two radical presidential candidates will face off against each other. Market participants may have begun to price in this growing uncertainty, as the yield spread between French and German 10-year government bonds has started to widen again in recent weeks. The period ahead promises to be full of twists and turns, so it will be worth keeping a close eye on developments in French domestic politics.
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Gold and silver prices have retested their uptrend lines, so the long-term trend may continue. Oil prices have broken out of a contracting pattern, which may signal the start of another upward wave. Natural gas prices have also begun to rise, signaling a buy. In the case of copper, the main uptrend remains in effect, and there are currently no signs indicating a change in the trend’s structure. Following significant gains, wheat and corn have become heavily overbought, increasing the likelihood of a correction.
We have revised our DCF model and earnings estimates for Masterplast (a Hungarian player in the insulation business with regional presence). We have lowered our 12-month target price to HUF 2552 (from HUF 3015 as of 01.08.2024), while we maintain our HOLD recommendation. The lower target price is primarily the result of a slower than expected rebound in the construction industry and due to shareholder dilution after the recent capital raise (~14.2% increase in share count).
Masterplast had a rather weak Q1 performance, with revenue being essentially flat compared to a similarly weak base period and it had an operating loss as well. On the upside, the EBITDA was positive and slightly higher YoY. While no turnaround can be seen yet in 2025, but there have been some positive signs here and there on a segment level (contribution of own-produced XPS and new revenue stream from the sale of Certified Energy Savings). The Home Renovation Program and the Rural Home Renovation Program may also have a positive impact on revenues in H2, and commercial production in the company’s new glass wool plant in Szerencs is scheduled to begin in Q3. We view these developments favourably, but the overall business outlook is still characterized by significant uncertainty .
The macroeconomic environment seems mixed: revenue-weighted GDP growth expectations in Masterplast’s countries point to a 1.8% increase in 2025 vs. 1.4% in 2024. However, this estimate was 3.1% a year ago and growth projections for later years are also slightly lower
The recent capital raise significantly improved the company’s liquidity situation (albeit at the cost of dilution). We think that Masterplast has enough liquidity to cover 2025 obligations provided that short-term working capital loans are rolled over. However, over the long-term the company’s cash generating ability must improve to be able to cover future obligations, notably bond repayments at the end of 2026
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