Kingspan Upgraded to Overweight by J.P. Morgan on Soaring Data Center Demand

J.P. Morgan upgraded Kingspan Group to “Overweight” from “Neutral” on Wednesday, citing powerful earnings momentum driven by a surge in demand for the building materials company's data center solutions.

The investment bank also significantly raised its December 2027 price target on the stock to €130 from a previous €95.

Data Center Boom Fuels Upgrade

The bank's positive revision is anchored in the performance of Kingspan's Advnsys segment, where order intake for data solutions has reportedly nearly quadrupled. According to the analyst note, this strong momentum is not yet fully reflected in the company's current valuation.

J.P. Morgan noted that Kingspan shares are trading at 13 times 12-month forward enterprise value to EBITDA (EV/EBITDA), which represents a discount of about 7% to their long-term average. The bank's sum-of-the-parts analysis suggested a potential fair value as high as €138 per share, implying considerable upside.

Revised Forecasts and Outlook

Reflecting the optimistic outlook, J.P. Morgan increased its financial estimates for Kingspan. The bank now forecasts for 2027:

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• Adjusted earnings-per-share of €5.54, a 10.7% increase from its prior estimate.
• Group revenue of €11.64 billion.
• Adjusted EBITDA of €1.78 billion, with the margin expanding to 15.3%.

Analysts also pointed to Kingspan's upcoming Capital Markets Day on November 10 as a potential catalyst. The event will focus on the company's U.S. roofing strategy, which J.P. Morgan believes could be a material source of upside not yet appreciated by the market.

Context and Risks

The bank views Kingspan as a preferred play in an inflationary environment, citing rising steel costs as a structural tailwind for the business. While J.P. Morgan sees limited near-term impact from emerging U.S. opposition to data center construction, it did flag potential downside risks.

These risks include a worse-than-expected macroeconomic environment across Kingspan’s key markets, significant volatility in raw material costs like steel, and any weakening in the company's ability to pass on price increases to customers.