Sika - Takeaways from UBS conference with Sika
* China sales decrease 2H'15E: -20% (UBS est.)
CEO Jan Jenisch presented at UBS’s 2015 Best of Switzerland conference. Jenisch clearly flagged the
difficult market environment in China for 2015 expecting to also last into 2016. Even though Southeast
Asia for Sika is still growing strongly, we expect Sika China to suffer a sales decrease of c20% in 2H.
Reducing our sales estimates for APAC plus factoring in a further FX devaluation in LATAM, we derive an
EPS'15-17E cut of -5% p.a. and a new PT of CHF3,550 (prev.: 3,650). Buy rating maintained.
* LATAM FX impact 2H'15E: -20% (UBS est.)
We estimate that China accounts for c25% of APAC, i.e. c5% of Group sales. We now assume a -20%
sales decrease for China in 2015. We reduce our FY'15 sales est. for APAC by 2% and 10% for FY'16.
As Sika does not participate with price rebates introduced by local competitors, Sika's margins in China
are little affected by the sales decrease. We furthermore increase our neg. FX impact for LATAM to -20%
(prev.: -15%). Our FY'15 LATAM sales est. are 6% down. On Group level, we derive a FY'15 sales est.
decrease of -1% (FY'16: -3%). As many raw materials for LATAM are being purchased in USD, the FX
devaluation also negatively affects profitability. Jenisch was however positive on Eastern Europe which he
expects to grow double digit in 2H. For Africa (c3% of Group sales, UBS est.) he expects a double digit
sales growth over the next few years.
* FY'15 Group sales growth (in LC): 6% vs. co guidance of 6-8%
For FY'15 we now estimate a 6% LC sales growth, i.e. the low end of the company guidance of 6-8%.
In org. terms our lowered estimates represent an org. 2% sales growth for FY'15 and 1% for 2H (1H'15:
4%). Our FY'15 sales est. are now 2% below cons. (3% below for FY'16).
* Valuation: PT down to CHF3,550.
We derive a new CHF3,550 PT (DCF). Buy rating confirmed.