JP Morgan has upgraded Kingspan Group PLC (ISE:KRX), the Irish building materials group, to 'overweight' from 'neutral', citing strong earnings momentum from its data centre exposure that it believes is not fully reflected in the valuation.
Order intake on data solutions for Kingspan's Advnsys segment has nearly quadrupled, yet the shares trade on 13 times 12-month forward EV/EBITDA, a discount of around 7% to their long-term average.
A sum-of-the-parts analysis by JP Morgan finds the Advnsys segment trading at a 15% discount to the relevant European capital goods data centre peer group, despite comparable margins and growth trajectory.
JP Morgan analyst Elodie Rall set a December 2027 price target of €130 on the shares.
Beyond data centres, Kingspan will host a capital markets day on 10 November in Oklahoma, expected to focus on its strategy for the commercial flat roof market in the United States, where the group has already outlined ambitions for a 15% market share.
JP Morgan said execution on the roofing strategy could prove a material source of upside in coming years, though the market has yet to fully appreciate this given the modest near-term contribution expected.
The bank also noted that Kingspan is a preferred play in an inflationary environment, with structural reasons for steel costs to continue rising given tariffs, the Carbon Border Adjustment Mechanism and rising EU carbon allowance pricing.
