> Energy, Materials & Industrials Q Kingspan — Priyal Mulji, BUY, close €38.5, €40 tgt, 4% upside ■ Kingspan is a global insulation producer, focusing on high-performance panels and boards. • We expect robust organic growth (5% p.a. to 20E). Kingspan should outperform its construction markets owing to its over-exposure to markets with low penetration rates (the USA, EM and Mainland Europe) and end- users' increasing focus on future-proofing buildings. • We see c4% upside to 2020E DBe forecasts if Kingspan meets its penetration targets. s We are already c2-3% ahead of consensus post-'17 on top line and trading profit. ■ M&A could drive c30% upside to our price target. We expect robust FCF/sales of 5-8% in coming years. - Levering to 2x net debt/EBITDA to spend on acquisitions would raise our forecast 20E EPS by up to c20%. - Management has cited M&A as a likely growth driver • Kingspan trades at a 24% discount to high-growth cyclical stocks. Comparing Kingspan's operational strengths (organic growth, EBITDA progression, scale of deleveraging and predictability and earnings) and EV/EBITDA to similar stocks such as Geberit and Halma illustrates that Kingspan offers excellent value. • Catalysts: FY17 results on 23-Feb Related DB Research: Kingspan: Insulated growth; Initiating on BUY (Munn Building & Construction: 2018 Outlook: Still opportunity (Johnsont Deutsche Bank We expect a step-up in organic growth... 5,000 4,500 - 4,000 - 3.500 - 3.000 2,500 2,000 - 1,500 • 1,000 - 500 - 0 woo Revenue, EUR m (Ihs) ▪ r6) Source: Deutsc• he Bank. company data .1) # eP fiSfo% % YoY organic (rhs) I 14% 12% 10% 8% 6% 4% 2% 0% ... but the valuation does not reflect this 2018E EV/EBITDA, x 25 23 21 Gebent Halms 19 • • • 17 Rotork Gvaudan 15 • • • pirax-Sacco 13 4.Assa Abby • Kingspan 11 Legrand 9 • Polypipe Source: Deutsche Bank. company data Renishaw 2% 3% 4% 5% 6% 7% 2018-20E average organic growth